1/18/2008 8:34:00 PM
Revenued pays trader £2 million in 'landmark' VAT ruling
Grey market traders received some good news last week when a tribunal overturned HM Revenue and Customs (HMRC) decision to withhold over £2m from a distributor.
Livewire Telecom will have £2.14m in VAT payments returned to it, in a decision that could pave the way for funds to be returned to disties in a similar predicament.
Martin O'Neill of Vantis, the solicitors who represented Livewire Telecom, said: 'This is the first case of its type to be won in the VAT Tribunal and it will assist companies contesting similar cases in the future because it successfully overturned a number of unreasonable assumptions about the mobile phone industry which have become the basis of HMRC's policy in this market.'
Since a European Court of Justice ruling in 2006, HMRC has been able to deny VAT repayment to any company which it thinks 'knew or should have known' that a VAT fraud had occurred in any of its supply chains, using a policy of 'extended verification'.
Critics say the policy was designed to disrupt the mobile phone industry by withholding the repayment of VAT for unreasonably long periods of time, affecting hundreds of companies. One industry source said: 'It's a euphemism for them holding up VAT and saying "we don't want you in the market".'
The first major casualty of HMRC's tougher stance on VAT payments led to European Telecom folding in May last year with the loss of 80 jobs after £8.4m was withheld from the company by HMRC.
O'Neill added: 'We are aware of companies who still have not received repayment, or a decision to deny repayment concerning transactions that were completed in 2006.'
A spokesman for HMRC said it would continue to hunt fraudsters. He said: 'The tribunal has found, on the facts of this case, that the company's transactions were not connected to missing trader fraud and/or that they neither knew nor should have known of that fraud. HMRC are considering the tribunal's findings in detail in order to decide whether or not to appeal the decision to the High Court.
Over 100 disties are thought to be in dispute with HMRC, with some estimates of the amount of tax owed in the high hundreds of millions.