VAT experts last week slammed claims by the government that 95 per cent of VAT fraud cases against traders are legitimate.
In a response to a petition, signed by more than 500 UK traders and distributors, against tactics employed by HM Revenue Customs (HMRC) to tackle VAT fraud, the government said: “Our response has been proportionate, targeted and risk-based.”
The government claimed it was liable to pay just one per cent of VAT repayment claims subject to extended verification, and that they have been repaid in full.
But leading VAT lawyer Alias Dass (pictured left), partner at Dass Solicitors, said: “It’s rubbish. Three cases have been heard, and traders have won two of them – and on those two, HMRC still hasn’t paid.”
Federation of Technological Industries chairman Fred Howarth said: “Traders have suffered one dreadful loss, and two big wins.”
A trader said: “It’s laughable. It’s HMRC’s opinion, and doesn’t at all reflect the view of the tribunal in recent months”.
The VAT and Duties Tribunal will rule on cases involving a further £10 million in witheld VAT in the next fortnight. In January, it ordered HMRC to repay £2.3 million in VAT to trader Livewire. At the end of February, mobile phone trader Olympia won its appeal against HMRC for around £1.8 million.
HMRC has responded by appointing forensic accountants KPMG to bring evidence on its behalf. The first cases in which KPMG will get involved will be heard later in the year.
Last week, the Tribunal heard the £1.5 million Brayfal case, which is being handled by prominent VAT lawyers the Khan Partnership, led by Hassan Khan (pictured right).
Cases against traders Our Communications, Honey Phone and Mobile X, for almost £10 million in withheld VAT, have also gone before the VAT and Duties Tribunal recently.
Honey Phone is being handled by VAT lawyers Chiltern, responsible for putting together the Olympia win. Decisions on Our Communications and Honey Phone are expected within the next fortnight.
“In over 95 per cent of cases where VAT returns are subject to extended verification, HMRC has found traders had either been participating in or profiting from trading linked to VAT fraud, and that their repayment claim is not properly due.”
“Only one per cent of the VAT withheld under extended verification has been found to be correctly claimed and properly repayable. These claims have been repaid as soon as HMRC has been satisfied that they were due.”