HM Revenue and Customs (HMRC) has hit back against the threat of any possible group action from channel players following the European Court of Justice (ECJ) ruling in favour of Bond House last week.
The ECJ ruled in favour of components wholesaler Bond House Systems, which had a multi-million- pound VAT rebate withheld after it unwittingly became involved in carousel fraud. Conservative estimates suggest that the case could cost the government around £1.2bn in VAT repayments, with a potential £5bn in damages and compensation claims.
However, in a statement to CRN, HMRC said: “Any claims for damages or compensation will be contested.
“HMRC will be reviewing around 150 cases in the light of the ECJ’s guidance. This includes the ECJ’s guidance in relation to input tax deduction and the trader’s know-ledge, or means of knowledge, when considering whether to make a repayment. Amounts found to be due will be paid as quickly as is possible.”
Hassan Khan, principal at London-based Hassan Khan & Co Solicitors, which represented Bond House in its original tribunal against HMRC in 2003, has over 25 VAT cases pending. However, he warned it could end up costing smaller firms more than they can afford if they try to pursue compensation or damages.
“There is still a sting in the tail over the ECJ ruling because of a paragraph that states VAT can be withheld if there is knowledge, or means of knowledge, that a fraud was committed. This means a firm has to prove to a court that it did all the necessary due diligence. Customs is still evaluating this very carefully.
“A lot of people are saying the Bond House ruling is the end of the road, but it is not true. There is still a lot of legal procedure to go through. People have to be careful of the bandwagon mentality,” Khan said.
Alias Dass, partner at Birmingham-based Dass Solicitors, which organised a public meeting last week to discuss the possibility of a group action against HMRC (CRN, 16 January), said: “There were over 300 delegates at the meeting. What traders want is instant gratification, but it is going to be a more drawn-out affair.”
The Bond House ruling has yet to become law in the UK, but it is expected to go through the High Court in March.
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