Millions in VAT at stake in co-op ruling

The prospect of paying out millions of pounds in unclaimed VAT repayments is
looming over HM Revenue & Customs as it awaits a Court of Appeal ruling on a
deal involving two co-operative societies.

The case, brought by Midlands Co-operative Society, deals with transactions
where a business sells on its trade and assets to a buyer, but not its shares,
and is then wound up.

The Midlands Co-op bought the trade and assets of the Leicester Co-op. But
after the Leicester Co-op was wound up, it emerged that it had been eligible for
VAT repayments of £100,000.

Midlands Co-op made the claim for the repayments, but HMRC argued that the
repayments were due to Leicester Co-op, which had since been wound down. HMRC
won at the VAT tribunal but lost in the High Court and is now waiting to see
what the Court of Appeal will say in its judgment, due in a month’s time.

Paddy Behan, head of indirect tax at Mercury Tax Group, said the decision
could have huge repercussions for HMRC as it would apply to any company that had
bought the trade and assets of another business. ‘This is an extensive and
significant case that could be very beneficial to taxpayers,’ Behan said.

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