TaxAdministrationCustoms triumphs in VAT retail battle

Customs triumphs in VAT retail battle

A VAT Tribunal has ruled in the government's favour to put an end to alleged VAT avoidance by high street retailers.

Link: How the scheme worked

HM Customs said many large retailers, including Debenhams, had been trying to cut the amount of VAT they pay to Customs. In this way, Customs argued, large retailers were gaining an unfair competitive advantage over smaller competitors.

The case centred around large retailers putting a request for customers to pay a 2.5% ‘card handling fee’ in small print on their credit and debit card receipts, even though the price is exactly the same as it would be for a cash sale.

Retailers have then claimed that this 2.5% should be exempt from VAT in common with other financial services.

But the independent VAT and Duties Tribunal sided with Customs and decided that retailers must pay VAT on the full retail price of goods sold in their stores.

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