UK government loses ‘carousel’ VAT ruling
UK government loses ‘carousel’ VAT ruling
The UK government on Thursday faced the prospect of claims for refunds of value added tax and compensation running into hundreds of millions of pounds after the European Court of Justice declared the approach used by HM Revenue & Customs to combat so-called “carousel fraud” was illegal.
The decision highlights the escalating problems associated with this type of scam which have become a serious headache for tax authorities across Europe in recent years.
Austria, holder of the rotating EU presidency, has promised to make the battle against VAT fraud one of the cornerstones of its six-month tenure.
It said its own approach – which involves levying VAT only when a product reaches the consumer and not when it passes from trader to trader – could serve as a blueprint for other member states.
On Thursday, in a long-awaited final ruling in two UK-based test cases, Europe’s top court said companies that were unwittingly involved in a chain of transactions where carousel fraud occurred at one stage, should still have the right to reclaim value added tax in respect of their own supply deals.
More: news.ft.com