A trader victory in the High Court against HM Revenues & Customs (HMRC) has been heralded as a groundbreaking win that will influence decisions made in future cases.
Livewire won its battle against HMRC over withheld repayments of VAT for £2.4 million after the judge, Mr Justice Lewison, said there were no means by which Livewire knew contratraders Sygnet and Uni-Brand were involved in fraud.
Mr Justice Lewison altered the test for ‘means of knowledge’ so HMRC was required, also, to prove its claims.
Mr Justice Lewison said the case, which began in 2006 and follows HMRC’s appeal of a VAT and Duties Tribunal ruling last year, will hand traders an “impenetrable shield” against HMRC. Law firm Malletts, which represented Livewire, said the case was won on clear evidence and future case decisions will also rely on evidence rather than inference alone (and not ‘witness statements’ as printed in Mobile News issue 431).
Malletts partner John Day said HMRC will have to rethink its tactics. He said: “The old days of simply arguing some kind of fraud occurred is not good enough anymore. HMRC has to do its job properly. This is very significant as it will now level out the playing field between HMRC and traders.”
He said the case may not result in a floodgate of claims but will mean hundreds of millions of pounds of VAT are likely to be repaid to traders.
Head of tax advisory group Vantis Don Mavin (pictured), also involved with Livewire, said: “This is a very significant decision affecting thousands of trading buisnesses which have had their VAT repayments withheld.
“It is right traders who are involved innocently in these types of supply chains should not be penalised and deprived of the often large sums of VAT repayments to which they are entitled. The ruling is particularly timely during this difficult economic period, as businesses are suffering.”