AOL will have to start charging its UK customers VAT but not until July 1, 2003. The move follows a policy review by HM Customs & Excise, and a campaign conducted by AOL UK’s chief rival Freeserve.
At present AOL UK is treated as a non-EU content content provider and therefore not subject to VAT. This has infuriated its competitors, including most notably Freeserve, which are treated as telecoms providers. The discrepancy is thought to save AOL around £30 million per year at present, a saving that would become even more considerable once broadband take up improves.