ECJ delivers VAT blow to government

The government will be forced to refund millions of pounds of VAT to companies following a crucial European Court of Justice (ECJ) decision this morning (12 January).

Peters & Peters partner Monty Raphael, instructing Blackstone Chambers’ Tom Beazley QC and Robert Englehart QC, acted for electronics companies Optigen and Fulcrum in their claim for VAT repayment.

The case concerns ‘carousel fraud’, in which traders buy goods overseas and then use VAT payable only in the UK to make a profit on the goods. Customs & Excise refused to repay VAT to Optigen, Fulcrum and a third company, Bond House, a decision upheld by the VAT & Duties Tribunal.

The High Court referred the cases to the ECJ, resulting in today’s ruling. The decision means that Customs will now have to prove that a company was complicit in carousel fraud, or was aware of it, before it can recover VAT on goods involved in such a case.

Englehart said: “There’s no doubt it’s a community problem and there’s great concern about VAT frauds within the European Community.”

Monckton Chambers’ Paul Lasok QC acted for Bond House, instructed by David Sweeting of IVC Tax Consultants in Leeds and Hassan Khan of Hassan Khan & Co tax boutique. Rupert Anderson QC, also of Monckton, represented Customs.