Customs & Excise failed to dissuade the court from allowing the Federation of Technological Industries (FTI) to go to the European Court over measures in the 2003 Finance Act.
The government now faces an anxious wait to learn if a key part of its anti-fraud strategy will break apart on the rocks of European legislation.
The FTI argued that the measures, which mean firms can be held ‘joint and severally liable’ for VAT fraud in their supply chain, had led to a 20% drop in trade in 18 months and that many businesses were forced to close.
Mark Cook, who stood down as FTI chairman after the victory, said: ‘Traders are given no benefit of the doubt and everyone is tarred with the same brush.’
But Customs is considering an appeal. ‘We have had huge success in tackling fraud in the mobile phone and computer chip sectors. The measures remain in force and we will continue to crack down,’ said a spokesman.
But Cook warned that the UK government could face ‘significant’ damage claims if the European Court ruling goes against it. Missing trader fraud, which includes carousel fraud, is thought to cost government £1.5bn annually in lost tax revenues.
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