Tens of millions of pounds are at stake after Customs took a hardball stance to clamping down on complex VAT fraud, involving resellers of computer chips and mobile phones.
US-based physical commodities trader, Dragon Futures, which has pulled out of the UK market as a result of Customs’ stance, said it was owed £16.5m by the government.
The chances of this being repaid would be greatly improved should the opinion of an European Court of Justice advocate general reverse a previous decision in favour of Customs.
‘The bottom line is that we will never operate in that market again after what it has done. We don’t trust the government,’ Carl Boriako, a director at Dragon Futures told Accountancy Age.
He said his company had pulled ‘hundreds of millions of dollars’ of inwards investment as a result.
The complex fraud Customs has tried to nullify involves importers and exporters wrongly reclaiming VAT on tax-free transactions. The Treasury tried to undermine the fraud by making every company operating in the market liable regardless of guilt.
Dragon had engaged a Big Four accounting firm and a firm of solicitors to advise on how best to perform the required due diligence, to ensure none of its traders was involved in fraud. Its actions went above and beyond Customs’ requirements.
‘This holds you liable for a fraud, even if you were diligent, just because you are an exporter,’ said Jason Collins of law firm McGrigors.
Should the taxpayers ultimately win, McGrigors hopes to establish a group litigation order against the government to reclaim the huge amounts of VAT wrongly paid by taxpayers.
A Customs spokeswoman refused to comment.
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