Mirror Group loses VAT court battle.

Mirror Group Newspapers has lost the latest stage in its battle to retrieve £1.5m of VAT paid on legal and financial advice for a share issue. The publisher intends to take the case to the Court of Appeal. And it predicts the case could prove a landmark and provide many companies with the basis for claiming millions of pounds back from Customs & Excise. The High Court threw out Mirror Group’s claim saying an issue of shares constituted ‘supplying a service’ and therefore VAT was payable. The dispute involves the issue of almost two million shares in 1992. Greg Sinfield, partner at Lovells, the law firm advising the Mirror Group, said: ‘I’ve heard from other people working at big accountancy firms that they have a lot of cases waiting on the result of this.’ The argument hinges on whether a share issue can be defined as an ‘investment’, as the publisher claims, or whether it is ‘supplying a service’, as Customs contends. Mirror Group, which has been hit by the share-tipping scandal involving Daily Mirror editor Piers Morgan (above), also claims VAT is a turnover tax and as the share issue is not included in turnover the input tax is not payable. Customs maintains it defines turnover more broadly for VAT purposes. The case could end up at the European Court of Justice. Stanley Esajas, a VAT consultant with Ernst & Young, said Mirror Group’s chances were better at the European Court because it has already considered similar cases.