Innocent traders may suffer VAT fraud crackdown
Key ECJ ruling could see unwitting traders held liable for carousel fraud
Traders who are unwittingly drawn into a carousel fraud chain could be held
liable unless they have taken all reasonable precautions to protect themselves,
an ECJ ruling has confirmed.
HM Revenue & Customs had pushed for traders to be held liable in an
effort to clampdown on the skyrocketing fraud.
The European court said that member states were free to enact laws holding
traders liable for VAT fraud unless they had taken ‘all reasonable precautions’
to protect themselves.
What amounts to ‘reasonable precautions’, however, is still unclear, and
could see innocent traders mistakenly charged with VAT fraud.
Hassan Khan, tax litigation specialist at Hassan Khan & Co, who acted for
Bond House systems in the ECJ, welcomed the ruling.
‘As expected the ECJ has determined that the joint and several liability
measures adopted by HM Revenue & Customs are lawful,’ Hassan said.
‘Importantly, however, it has also recognised that legitimate traders are
entitled protection from these to the extent that they reasonable precautions.’