Paymaster-general Dawn Primarolo last week floated the idea of introducing legislation to stamp out VAT avoidance in the supply of construction services. If successful, it would be introduced in other industries.
The scheme involves the introduction of a catch-all act to penalise firms that have found loopholes in VAT rules.
Celia Brennan, head of indirect tax at accountant KPMG's property group, opposes the plan.
She said: "There will be serious side effects, the worst of which is the uncertainty it creates. Purchasers of construction services will have no clear idea of what their tax positions will be. They face the danger of getting pricing wrong." The upshot was likely to be a loss of confidence among clients over whether they could afford to procure construction services, she said.
Construction tax specialists have spent 18 months talking to Customs and Excise about VAT legislation. This work would be sidelined if Customs and Excise decides to opt for the new approach.
Primarolo has asked firms to tell the government whether they prefer the idea of a general rule or would rather see specific anti-avoidance legislation.
Brennan appealed to construction firms to make submissions: "If I had the choice, I would prefer specific legislation. Businesses need to respond to the exercise and let the government know what they think."