CONCERN is being voiced that Inland Revenue proposals to encourage
multinationals to set up international holding companies in the UK may
be thrown off course by a Customs and Excise proposed policy on the
recovery of Value Added Tax.
A consultation paper was promised by former Chancellor Norman Lamont
in his last Budget, outlining a scheme for dealing with surplus Advance
Corporation Tax arising out of dividends paid by UK companies out of
foreign profits, with a special scheme to encourage multinationals.
But it now appears that at the same time as those proposals Customs
and Excise is proposing to alter its previous interpretation of the
existing VAT law. With effect from 1 October this will deny holding
companies the ability to recover VAT on their costs.
''It seems strange that while one Revenue department is proposing a
direct tax regime to attract companies into Britain, another one is
indirectly undermining that effort,'' commented Mr John Fuszard, senior
VAT manager at accountants Ernst & Young's Glasgow office.
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