VAT gets the computer treatment

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VALUE Added Tax is one of the most vexing issues facing the modern business. Since it is payable on transactions, rather than profits, the VAT bill does not necessarily go down when the going gets tough. On top of that is the accepted notion that Customs and Excise, which collects the tax, is demonstrably tougher than is the Inland Revenue in pursuit of income and corporation taxes.

A total of about pounds 40bn in VAT is expected to be collected this year - 20 times more than when the tax was introduced 20 years ago. So this is no trifling matter, especially since penalties are being introduced for late payment. It is certainly serious for the City, which has started to bear an increasingly large burden for the tax.

This is mainly because, although financial institutions do not charge VAT, they are increasingly liable for it because they use so much technology in telecommunications and in making transactions.

The result is that organisations may be unsure whether or when they are liable for the tax.

It is in an effort to help companies through this confusing situation that Arthur Andersen, the chartered accountants, has developed a simple piece of software for its clients among banks, insurance companies, building societies and corporate treasury departments.

The VATdisk, said to be the first of its kind, was designed by Martin Sharratt, a senior manager in the firm's VAT department who has extensive experience of the financial services sector, with the help of department head Keith Miers. It works on a word-search principle to guide users through a number of defined areas. By using cross-references, the disk enables clients to cover all the relevant issues.

Mr Sharrat said the increasing complexities of the VAT system had led the firm at first to consider publishing a book. But it was felt that a software disk would be more adapatable and easier to update.

Needless to say, Arthur Andersen does not see the disk as a way of doing away with its services, but says it is designed to 'give guidance and to focus attention on the critical areas' so that a client will be able to judge whether it needs expert help.

Clients will initially receive the disk free of charge. Depending on reactions to it, the idea may be extended to other areas.