A landmark court case against Customs and Excise's clampdown on VAT missing-trader (or carousel) fraud came closer to completion last week after receiving a positive official Opinion from the Advocate General of the European Court of Justice (ECJ).
In April 2003, components wholesaler Bond House Systems Ltd lost a tribunal case against Customs after it unwittingly became involved in carousel fraud. As a result, the firm had its multimillion-pound VAT rebate withheld. Four weeks later, two other firms, Optigen Ltd and Fulcrum Electronics Ltd, suffered the same fate.
All three companies appealed to the ECJ, the final judgment of which is due later this year.
However, one source close to the case told CRN: "It is widely believed that the Advocate General's Opinion is accepted by the ECJ 95 per cent of the time."
In the Opinion, Advocate General Poiares Maduro said: "The UK seems to envisage combating carousel fraud by limiting the scope of the VAT system. To my mind, the Court should not consent to this approach.
"It would drastically shift the burden of the problem from the tax authorities to the private sector at the expense of legitimate trade." A representative of the Federation of Technological Industries, the body that represents UK mobile phone and components traders, said: "This is an important decision for the industry. Customs spends time penalising legitimate traders when it should be targeting fraudsters."
A Customs representative said: "We note the Opinion, but must await the final judgment.
"Our VAT fraud strategy has successfully reduced fraud in the UK, and is a top Customs priority. This tactic is only one of the tools we use to tackle this kind of fraud."
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