Crafty Hauliers Defeated On Toll VAT Reclaims

by Jason Gorringe, Tax-News.com, London

20 April 2001

Following last September's European Court Of Justice ruling that in France, Ireland and the UK, VAT has to be levied on road and bridge tolls operated by private enterprise, the three countries have applied VAT to private tolls from 1st January 2001.

Businesses which incur road tolls across Europe, not just in the three member states referred to, can of course submit reclaims for tax paid to the relevant European VAT authorities for VAT paid from 1 January 2001, provided VAT receipts are obtained. Other member states already charge VAT on private road tolls.

The governments concerned have had to pay the EU's share of the VAT that should have been collected back to the dates on which private tolls began to operate (1994 in the UK), although the UK government at any rate has not had the temerity to try to back-charge the operators for its share of the uncollected (but legally due) VAT.

On the grounds that the pre-2001 tolls should have been Vatted, some cute road hauliers have tried to include pre-2001 VAT reclaims in their current post-2001 claims - but the VAT authorities have unsurprisingly refused to cough up.

The ruling has caused considerable confusion, since it intersects with the contracts under which private operators hold their franchises from the states concerned, and also inevitably favours business users as against private users of tolled facilities: it's impossible for an operator to apply differential rates of toll since he doesn't know who can reclaim and who can't.

After the judgement, Tony Lynne, Head of Indirect Tax at KPMG said: 'The fact that three disappointed EU governments will have to change the relevant law in this area is another telling indication of how European Court decisions are increasingly influencing tax law in all Member States. The Court is a bigger driver towards tax harmonisation than anything proposed by the European Commission. VAT has always been a European tax but this is becoming equally the case for direct taxes as well.'

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