TaxPersonal TaxDFS £50m credit battle

DFS £50m credit battle

European courts have set a date next month to rule on a seven-year battle between UK retailers and Customs & Excise over whether VAT can be charged on interest free loans.

The European Court of Justice is due on 28 November to consider the test-case of Primback versus Customs at the centre of the wrangle which will foot either government or business with a huge bill.

Liquidated furnishing company Primback first took Customs to court in 1993 to claim back £6m VAT paid on its loans.

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

Last week furnishing giant DFS revealed in its annual report that it had ring-fenced in case of a Customs victory a £55.5m cash pile, which amounted to almost £10m more than its £46m annual pre-tax profits.

The furniture industry is one of the biggest users of interest-free credit deals for its customers and stands to

Martin Hall, director general of the Finance and Leasing Association, said that the effect of a judgement on the retail sector would depend on ‘the detail of individual contracts with finance providers.’

‘When Kenneth Clarke was chancellor their was talk that this case could cost us £5 billion,’ a Customs official said. ‘It was never going to cost us that amount – we have a three year cap on the amount of money we pay out in these disputes.’

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DFS holds £50m for tax fight

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