Customs' cold Xmas comfort for Iceland

Frozen food giant Iceland had an unwelcome Christmas gift, when it lost a VAT tribunal appeal involving the timing of tax repayments worth more than #11m.

The dispute with Customs & Excise arose after Iceland restructured its operations by transferring its retail activities from one group company to another.

Iceland claimed the stock involved should be treated as goods received for resale in the first accounting period of the previously dormant trading company.

But Customs said it should be treated as goods in stock at the beginning of the year, which meant that #11m in output VAT was not repaid for almost a year.

The Manchester tribunal, which found in favour of Customs, heard rules governing special VAT schemes for retailers had since been changed and large groups now agreed bespoke schemes.

Alison Carey, an indirect tax specialist with PricewaterhouseCoopers, said: ‘In this case, the tribunal prevented Iceland from benefiting from a loophole, which Customs has since closed.’ Iceland refused to comment on the case.