Andrew Smith said: 'We have always opposed the principle of charging VAT in this area and fought hard to keep all toll charges free of VAT. We are determined to protect motorists from the impact of this unwelcome ruling.
'I have asked Customs and Excise to hold urgent consultations with operators of those tolled bridges and roads affected to devise a scheme of Government support to offset the cost of VAT. It will be fully funded.'
The aim of the scheme will be to ensure that motorists do not pay more, as well as making it as simple as possible for businesses to reclaim VAT.
1. The United Kingdom, France, Holland, Ireland and Greece currently do not levy VAT on road, bridge and tunnel toll charges. The majority of tolls are operated by, or on behalf of, the public sector and tolling has been viewed as simply an alternative means of funding public roads.
2. In the late 1980s the Commission questioned this, arguing that tolls should be taxed at the standard rate of VAT. The UK explained its reasoning to the Commission, which did nothing until 1996 when it announced it would take the five member states to Court.
3. The court has ruled that while the United Kingdom is right not to levy VAT on tolled roads operated by public authorities, VAT should be applied to tolls levied by private operators.