TaxPersonal TaxDFS holds £50m for tax fight

DFS holds £50m for tax fight

Furnishing giant DFS has set aside more than £50m to pay Customs & Excise if European courts rule that VAT can be charged on interest-free loans, Accountancy Age reported today.

The UK’s largest furnishing retailer will today reveal annual accounts that have ring-fenced more than double its £22m half-year profits to cover a potential victory by Customs in Luxembourg.

With other retailers watching the case closely, Treasury officials have hundreds of millions of pounds at stake.

The furniture industry is among the sectors which stands to win or lose the greatest amount as it is one of the biggest users of interest-free credit deals for its customers.

These credit deals were used by many retailers to help buoy sales during the last recession.

The multimillion pound battle centres on the test case of liquidated furnishing company Primback which first took Customs & Excise to court in 1993 to claim back £6m VAT paid on its loans.

The House of Lords handed the case two years ago to the European Court of Justice 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.

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