DFS unlikely to keep withheld VAT
The UK's biggest furniture retailer may have to pay Pounds 62m in VAT it put aside in a legal dispute concerning the VAT-treatment of tax-free credit.
Doncaster-based DFS Furniture is awaiting a ruling from a precedent-setting European court case over Customs & Excise’s interpretation of VAT rules on tax-free credit used by many DFS customers.
The case involves liquidated furnishing company Primback which first took Customs to court in 1993 to claim back Pounds 6m worth of VAT paid on its loans.
The House of Lords handed the case to the European Court of Justice two years ago after Customs disputed a 1996 Court of Appeal finding that the price paid for goods sold on interest-free credit was in fact payment for credit.
Lord Kirkham, the DFS executive chairman, has said there is ‘little chance’ it would be able to keep the money, and will be forced to pay the outstanding tax.
He has, however, indicated that there is a small chance the company could keep about Pounds 15m of the VAT money, as the earlier stages of the dispute might be ruled out of time.
Kirkham’s comments came as DFS posted strong interim results for the second half of 2000. DFS reported record profit before tax of Pounds 24.4m on sales of Pounds 192.6m.
Lord Kirkham said he was confident the strength of DFS would be reflected in another year of profitable growth.
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DFS holds Pounds 50m for tax fight