Sent spinning by Carousel fraud. Now you can claim VAT - Andersons Solicitors Nottingham

It’s not often that the European Court of Justice is seen as a friend to businessmen in their disagreements with the taxman but a recent judgment may help win a few hearts and minds.

The court has ruled that traders unknowingly caught up in business transactions where fraud takes place somewhere along the chain should still be able to claim VAT.

The judgment rejected the argument put forward by HM Revenue and Customs that fraud tainted business transactions to such a degree that VAT should not be recoverable.

Carousel fraud – so called because it often involves a circular supply chain – has been increasing over the last few years costing the government millions in lost revenue.

The government’s response to help limit the losses has been to stop innocent firms from claiming VAT rebates, arguing that it’s no defence to say the firm didn’t know anything about the fraud.

The European Court however has rejected this argument and makes it quite clear that it’s unlawful for Revenue and Customs to effectively penalise an innocent trader for fraud committed by someone else.

The Revenue and Customs may have lost this battle but it’s unlikely they’ll give up that easily. Many experts believe they will now look for other ways to recover the lost revenue.

We shall keep clients up to date with any developments.

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