European court overrules HMRC

ECJ backs mobile phone traders in VAT case

Traders that have had VAT repayments withheld by HM Revenue and Customs (HMRC) have been offered a ray of hope following a landmark ruling by Europe’s highest court.
A group of 14 mobile phone traders are set to recoup £18m in VAT withheld by HMRC after successfully taking their fight to the European Court of Justice (ECJ).
The traders had delivered a batch of phones to a warehouse in 2002, where they were to be exported to a Spanish firm. But HMRC withheld their VAT repayments after discovering the phones never made it to their planned destination.
Experts believe the ECJ’s ruling could have wider implications for UK traders who have had their VAT withheld as part of HMRC’s fraud-busting Extended Verification process.
Alias Dass, a partner at Dass Solicitors, the lead law firm in the case, told CRN: “The ECJ said that if a trader has done everything in its powers to check the documentation is correct and is not involved in fraud, HMRC must repay the VAT.”
Dass added that he hopes the 14 traders will be repaid by Christmas.
Clive Jefferson, managing director of Procomm, which is still owed £3.5m in VAT by HMRC as a result of Extended Verfication, said: “If this ruling is applied to the Extended Verification Process it would be brilliant news for the industry.”
“This might not make it easier for us to get the VAT back, but the weight of the argument is now on our side.”
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