Mobile Phone Traders To Take VAT Battle To ECJ

by Robin Pilgrim, LawAndTax-News.com, London

20 February 2004

Mobile phone and silicon chip traders have been granted permission by the UK's High Court to appeal changes to the country's VAT laws which they argue could put them out of business.

The proposals put forward by UK Customs and Excise to clamp down on so-called 'carousel fraud' have been heavily criticised by both the accounting profession and the traders themselves.

In order to execute a carousel or missing trader scam, which is most commonly found in the computer, mobile phone, alcohol, and fuel sectors, a UK VAT registration must be obtained in order to acquire goods VAT free from other EU member states. The goods are then sold on at VAT inclusive prices, following which the fraudster disappears without paying the VAT back to the UK government.

Under the measures put forward by Customs last year, the onus is on traders in the supply chain to ensure that their suppliers or customers are legitimate and intend to fulfil their VAT obligations to the government. If Customs finds that firms have not taken 'reasonable steps' to ensure this, they will be made liable for the full amount of unpaid tax.

Mobile phone and computer wholesalers have argued that the rules are impracticable, and that the threat of sanctions may put some traders out of business.

Ruling in the High Court on Wednesday, Mr Justice Lightman granted industry body, the Federation of Technological Industries, and 53 individual traders leave to put their argument before the European Court of Justice. He also refused the Customs Department permission to take the case to the Court of Appeals.

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