Victory by electrical retailer could set a precedent in helping mobile dealers reclaim tax from HMRC
Electrical retailer Atlantic Electronics has won a landmark court case that could set a precedent in helping mobile dealers reclaim tax from HM Revenue & Customs (HMRC).
HMRC operates a process called extended verification, under which it withholds VAT repayments, often for a number of years, as part of attempts to stop VAT fraud.
This has led to many firms waiting years for substantial payments to which they are legitimately entitled.
Until now, traders whose payments have been withheld by HMRC since before April 1, 2009 have been liable to pay case costs incurred by both themselves and HMRC if they lose a case.
However, the ruling on an appeal brought by HMRC against Atlantic Electronics, means tribunals on extended verification cases can now award costs as they see fit to either side.
This is expected to give traders more confidence to take cases to tribunals without the fear of having to pay huge costs incurred by HMRC.
As well as reducing risks for traders, the ruling is expected to make HMRC more cautious in applying extended verification and fighting attempts to challenge it.
Jeffrey Green Russell senior partner Philip Cohen (pictured), who represented Atlantic in court, told Mobile News: “The taxpayer is seldom best served when fighting against the Crown. Taxpayers and businesses should be able to play on a level playing field when contesting HMRC.”
Jeffrey Green Russell tax consultant Monty Jivraj said the ruling is especially significant for mobile traders.
He said: “The mobile phone industry has a long history of suffering at the hands of HMRC, particularly when HMRC officers take up to six years to complete extended verifications.
“The method of preventing tax avoidance through extended verifications schemes is an inefficient and unsustainable use of HMRC’s resources and imposes a significant burden on businesses.
“The ruling in Atlantic Electronics has eliminated the costs risk for many businesses and taxpayers when fighting HMRC.
“The basic principle should be that each party will bear its own costs if they lose.”