The future of hundreds of UK traders owed money by HM Revenue and Customs (HMRC) under its Extended Verification anti-fraud scheme hangs on the outcome of a recent case at the Court of Appeal.
Four UK mobile phone traders – Calltel, Opto Telelinks, Mobilx and Blue Sphere Global – took HMRC to the Court of Appeal in a joint case last week, after efforts to get their combined VAT payments of about £26m repaid through a VAT and Duties Tribunal and the High Court fell through.
The appeal centres on a case involving Belgian trader Axel Kittel, whose case against his government at the European Court of Justice (ECJ) in July 2006 set a precedent for future VAT cases in Europe after it ruled that traders should not have VAT withheld if they have "taken every precaution reasonably required of them to ensure their transactions are not connected with fraud".
But the ruling has since caused confusion in the UK with unlimited interpretations of the law.
Expected at the end of March/beginning of April, the outcome of this latest appeal will either give the 600+ other traders owed up to £8bn by HMRC the green light, force them to appeal to the Supreme Court against the decision if it goes in HMRC’s favour, or refer the whole case back to the ECJ for a final and definite clarification.
Alias Dass, partner at Dass Solicitors, which represents a number of traders caught up in Extended Verification and HMRC’s other strategy Reverse Charge, said: “There are a lot of people on the edge of their seats and biting their nails in anticipation of the outcome of this case.”
One trader, who asked to remain anonymous, said: “It will be very interesting to see what comes out of this case as it will have far-reaching implications either way.”
In a statement to CRN, an HMRC representative said its anti-fraud moves were working.
“HMRC’s MTIC fraud strategy has had a dramatic impact on the levels of MTIC activity and subsequent losses. The various elements of the MTIC strategy, including the reverse charge, remain highly effective in suppressing carousel fraud, enabling HMRC to focus resources on areas of greatest risk such as the identification of, and action taken to tackle, fraud in carbon credits,” he said.
“HMRC’s multi-faceted approach has ensured that losses have been kept well below their peak in 2005/2006. In three years the impact of MTIC fraud on receipts per annum has been reduced by £1.5bn to £2bn.”
However the representative added that HMRC is conscious of the fact that the fraudsters have not “gone away”.
“New fraudsters or variants may spring up if we do not remain diligent,” he added.
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