VAT ruling will help UK businesses

A legal decision making non-European Union (EU) companies liable for VAT on internet-based sales to EU-based customers should help make UK firms more competitive.

Analyst Meta Group says the move closes a tax anomaly.

Vice president Jeffrey Mann said: 'For British firms, it's a good thing, as it will eliminate anti-competitiveness in the UK. It's ridiculous for overseas firms to be able to undercut UK suppliers.'

But the legislation may make ecommerce more complicated, he warned: British companies selling goods online to other countries will have to deal with varying tax regimes, depending on where their customers are based.

And the laws need to be seen to work effectively, says Mann.

'The rules have been set up, but not all of the working details are entirely resolved. The next battleground will involve reducing the complexity of the legislation, and moving towards more transparency and evenness,' he said.

Following the implementation of the Online Sales Tax Directive, which is effective from July 1, the European Commission is now investigating possible changes to VAT law for the supply of services.

It is considering changing rules putting the burden of payment on the trading customer rather than the supplier.