Business – EC rules against #30bn VAT refund

British business has lost the penultimate round of its European Court fight to claim back the VAT paid on company cars – thought to be up to #30bn.

In a preliminary ruling last week, Advocate General Leger said the UK government need not relax its restrictive VAT recovery laws.

The total value of potential claims is estimated at #15bn, but experts say interest charges would double the figure.

Customs & Excise has blocked attempts by businesses to recover VAT on car fleets. Allied Domecq, Royscot Leasing, Royscot Industrial Leasing and TC Harrison Group led the legal action, but other businesses have also lodged substantial claims.

George Michie, head of indirect tax at KPMG, which advised TC Harrison, said: ‘The unfair nature of the current system, in which UK car dealers are burdened with additional costs, was recognised by the European Commission, but not by Customs & Excise or the Advocate General.’

Recovery on cars was temporarily blocked when the VAT system was introduced in 1973. A reclaim system, due to be in place by 1982, was never finalised.

The European court is expected to uphold the decision later this year.

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