VAT fraud is a thorny issue for HM Revenue and Customs. So thorny, in fact, that it is thought to have torn a ragged hole in the Treasury’s finances, a hole even deeper than the rash of group litigation orders on corporation tax that have been cause for much irritation among the tax authorities.
Today, the European Court of Justice will rule in the Bond House case and
decide whether innocent victims are entitled to VAT rebates despite becoming
caught up in fraudulent schemes.
HMRC wants the ECJ to rule such fraudulent transactions as ‘non economic’ –
never intended for commercial purposes and therefore no one involved is entitled
to their VAT back.
Companies caught up in this tax villainy want a ruling that the transactions
were ‘economic’ and argue that they are therefore fully entitled to have their
value added tax returned.
So what should be done?
Regardless of which way the ruling goes today, it appears inequitable for
innocent victims to have to carry the burden of responsibility.
In taking the stance that it has, HMRC has essentially washed its hands of
the problem, choosing to take the VAT from whomever rather than pursue the real
perpetrators. It’s just too bad for any innocent parties caught up in the debate
– someone has got to pay up.
Once again businesses and the private sector are being told to carry the can,
instead of government getting a grip for itself.
What’s required from the tax authorities is some strategy for dealing with
the real criminals instead of merely targeting the legitimate traders that just
happen to be the easiest to find.
To toy with interpretations in the way HMRC has, in order to find someone to
take money from, is neither addressing the problem nor treating its victims with
fairness.
For some time now, the majority of businesses have jumped through hoops of
paranoia to check the authenticity of suppliers in a desperate bid to avoid
being lumbered with unwanted and illegitimate VAT liabilities.
Those businesses will be keeping everything crossed in the hope that the
today’s ruling in Europe goes their way.