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Toll firms face multi million pound VAT bill after Euro court ruling

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TOLL BRIDGE and tunnel operators face losing tens of millions of pounds in revenue each year as a result of a European Court ruling on VAT.

The decision could hamper efforts to repay bank loans taken out to fund construction work and could result in motorists avoiding crossings if VAT increases are passed on.

Confusion about future revenues emerged this week following a preliminary ruling by the Advocate General to the European Court of Justice. A panel of judges is expected to ratify the decision this summer.

Advocate General Siegbert Alber ruled that Britain had broken European law by failing to impose VAT on tolls. He also said the ruling should be applied retrospectively from 1994 even though Britain had failed to implement the law which came into force in 1977.

The ruling affects the privately financed Second Severn Crossing, Queen Elizabeth II Bridge at Dartford and the Skye Bridge, plus the publicly owned toll tunnels across the Mersey and Tyne and bridges across the Forth, Humber and Tamar.

Bankers and toll crossing operators were this week uncertain about the exact impact of the ruling which is expected to force a change in British VAT law. They said the Government could either take VAT out of existing toll charges or it could force them to pass the 17.5% VAT charges on to motorists.

Taking the VAT out of existing toll charges would, for example, force a major renegotiation of the terms for the Second Severn Crossing.

'Our revenue is £60M a year,' said Severn River Crossing deputy general manager James Rawle. 'Taking 17.5% out of that is quite a large slice.'

He said the Government could offer to increase the length of the Second Severn operating concession in recognition of the loss of revenue. But he pointed out that the crossing would face a short term funding crisis, as the loss of VAT money would prevent it from meeting debt repayments.

Rawle also warned that attempts to claw back unpaid VAT could lead to a dispute over VAT paid on the construction of the bridge. SRC paid VAT on the construction work but did not reclaim it from the Inland Revenue.

Andrew Bolton

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