Unistar Trading and Unistar Group prove no involvement in MTIC fraud
Mobile phone companies Unistar Trading and Unistar Group have won their appeals against HMRC over withheld VAT payments totalling almost £2.4 million.
Both firms, which traded handsets both in the UK and abroad, had VAT repayments withheld after the HMRC exercised a policy in 2006 called ‘extended verification’.
The policy required traders to demonstrate they were not privy to ‘missing trader intracommunity’ fraud (MTIC).
On January 18, the judge at the Manchester First-tier Tax Tribunal, found neither company knew, “nor ought to have known”, the transactions were part of an MTIC fraud.
Unistar Trading Limited, which went into liquidation in 2009, is to receive withheld payments totalling £933,345 for business in April 2006.
Unistar Group Limited, which according to Companies House is active but not trading, is to receive withheld payments of £1.5 million for business in April and May 2006.
The decision is subject to appeal by HMRC, which has 56 calendar days from the time the judgement was passed down to decide whether it wants to make an application to appeal it. HMRC said it has yet to make a decision on the matter.
The directors of the two companies during this period, Anthony Hussey and Ruarri Spurgeon, neither confirmed nor denied the story.
It is the second victory for a mobile trader against HMRC in a case relating to extended verification in the past four months.
In November, Kent-based mobile retailer JDI Trading won back £688,000 in withheld VAT payments relating to sales of mobile phones purchased in the UK and exported to Europe in 2006.
Martin O’Neill (pictured), customs investigation and litigation specialist at financial services firm Smith & Williamson, who won the JDI Trading case, said last week more than 200 appeals against the HMRC relating to extended verification have been made to date, with the majority proving unsuccessful.
He added two more mobile traders will find out if their appeals have been successful in March, while three more are set for hearings due shortly.
O’Neill said: “Law changes have limited the potential for VAT fraud in the mobile phone industry going forward, as VAT on trade in these goods in the UK has been effectively removed, but there are significant numbers of telecom and other tech products in which the VAT exemptions do not apply, and VAT fraud remains a significant risk.
“We advise companies trading in high-value stock, particularly exporting companies, to take advice from experts and manage their potential exposure to VAT fraud.