United Kingdom - Tax move may hit VAT sufferers

Companies that have been overcharged for value added tax (VAT) could be forced to take lower compensation payments under changes proposed by Revenue & Customs.

The plan follows the creation of a new legal framework for government tribunals in which the majority, including those hearing appeals against Revenue decisions, will be administered by a single tribunal service.

In a consultation document on tax appeals, the Revenue has suggested removing the VAT & Duties Tribunals’ power to set the interest rate on repayments for businesses that have been overcharged.

The power of the indirect taxes tribunal to increase the level of compensation would be replaced by a fixed interest rate similar to that imposed on direct taxes, a move the Revenue admits could lead to lower compensation payments to taxpayers.

Glyn Edwards, VAT consultant at CCH, an accountancy firm, said: “This is bad news for businesses that have suffered from a Revenue mistake.”

Source : Financial Times - London, England, UK, dated 30/11/2007