Retailer wins appeal over £688k of withheld VAT

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Refurbished handset trader JDI Trading wins case against HMRC at Tax Tribunal

Refurbished mobile phone retailer JDI Trading has won its appeal against HMRC over withheld VAT payments totalling £688,000.

The Kent-based firm was accused by HMRC of ‘missing trader intra-community fraud’ (MTIC fraud) relating to nine transactions in consignments of mobile phones purchased in the UK and exported to Europe in 2006.

Last month, JDI won its appeal after the Tax Tribunal found it did not and could not have known fraud was being carried out by others in the supply chain.

The tribunal also dismissed the views of HMRC’s “expert” on grey market trading, John Fletcher – a consultant for tax advisory firm KPMG – after he was deemed to have no first-hand experience of the trade.

His impartiality was also called into question as KPMG is a member of the Anti-Grey Market Alliance.

Fletcher has given evidence in around 20 cases of this type that have gone against mobile traders, and the tribunal’s judgment could now have implications for those firms which have failed in previous attempts to reclaim withheld VAT.

Smith & Williamson partner Martin O’Neill, who represented JDI, said: “We disputed HMRC’s entire approach to cases of this type as well as the evidence
they served. While the taxpayer has won few cases of this type, it demonstrates that not all MTIC appeals inevitably lose in Tribunal, and that legitimate businesses who have exercised proper care in the management of their affairs, can prevail in appeal proceedings.

“Litigating cases of this type is highly specialised, requiring solid expertise and persistence –you cannot take shortcuts while preparing such a case. This is arguably a landmark decision in a notoriously complex area of VAT law.”

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