Fleet News

Catch-all rules set to outlaw VAT avoidance

TAX-aggressive fleets, leasing companies and daily rental firms could find their VAT plans outlawed by new catch-all tax avoidance legislation. Paymaster General Dawn Primarolo said the Government was determined to make the tax system fairer and end VAT avoidance schemes which cost the Treasury about £1 billion per year in lost revenue.

'Tax avoidance undermines fairness in business by making the tax burden fall heavier on those who do not pay for creative tax advice,' she said. Her comments followed the publication of a HM Customs & Excise consultation document which has called for business reaction to proposed mini general anti-avoidance rules (GAARs).

Mini-GAARs would be used both to combat areas of VAT avoidance and to discourage future avoidance schemes, as opposed to the current system which relies on specific legislation to close loopholes on a case by case basis.

The consultation document says: 'Avoidance schemes have been countered by litigation and by anti-avoidance legislation aimed at specific mischiefs. But litigation can take years to resolve, and specific measures have their disadvantages. They complicate the tax, can open up further avoidance opportunities if they are narrowly framed, or may - if they are drafted very widely - have an adverse impact on 'innocent' non-avoiders. 'Mini-GAARs can be more precisely targeted on would-be avoiders and avoidance transactions.'

Fleets unsure of whether the structure of their VAT arrangements with a supplier contravene mini-GAARs will be able to submit their plans to Customs for clearance, in the same way that a number of leasing companies have sought Inland Revenue clearance for their personal motoring schemes. Comments should be sent to Neville Trout, HM Customs & Excise, Tax Avoidance Branch, 22 Upper Ground, London SE1 9PJ by March 1, 1999. Copies of the consultation document can be ordered on 0171-865 5318.

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