Freeserve tax row for Brussels

INTERNET group Freeserve is about to take its long-running fight for equal tax treatment with its major US competitor AOL to the European Commission. Chief executive John Pluthero said the firm's lawyers are drafting letters to be sent to competition authorities in Brussels by the end of the week asking them to scrutinise Britain's position on VAT treatment of internet service providers.

Freeserve argues that a loophole in British Customs and Excise regulations allows AOL, and other ISPs based outside the European Union, to avoid paying VAT.

Freeserve claims the anomaly is peculiar to Britain, and is costing the Treasury about £30m a year in lost takings from AOL. It says a Customs and Excise pledge to tighten the regulations by September has lapsed and that Customs minister Paul Boateng and Government e-envoy Douglas Alexander have not replied to letters asking them to investigate.

A spokeswoman for Customs and Excise agreed a September deadline had slipped and said it had talked to AOL this month as part of an 'information-gathering' excercise.

Freeserve, owned by France's Wanadoo, employs 700 people in Britain. It says regulations may force it to relocate outside Europe.