Law firms may litigate to stop box breakers from going bust

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Lawyers issue legal threat to HMRC following changes to rules on VAT repayments to international businesses buying batches of handsets in the UK

HMRC could face legal action after two leading lawyers accused the tax collection agency of making it near “impossible” for box breakers to trade in the UK.

Their comments follow recent changes to HMRC’s rules on VAT repayments to international businesses buying batches of handsets in the UK. These state firms must present a single invoice for their purchases before any VAT can be returned.

Smith & Williamson partner Martin O’Neill and Dass Solicitors lawyer Robert Holland (pictured) said given that box breakers purchase handsets from many different stores, presenting a single invoice is not possible.

Retailers are also instructed to monitor customer buying patterns, with stores typically unable to sell more than two handsets to the same customer on any one day. This, Holland and O’Neill argue, is denying box breakers “legitimate” and “entirely legal” trade.

Holland said five registered companies have contacted him as a result of the rule changes and are considering a class action.

Holland said: “HMRC changed these rules with the deliberate intention of targeting box breakers, because they don’t like it. HMRC do not understand, or it refuses to understand, that phones can be bought and sold outside of distribution channels, which is perfectly legitimate.

“I think the intention of the notice is to eliminate box breaking completely. If this is the case, we want to challenge it in court.”

O’Neill added: “The box breaking market is entirely legal. Actions by either the payers of these subsidies or government agencies to inhibit this market are potentially an attack on legitimate trade and we encourage those involved to take legal advice at the earliest opportunity.”

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