Accountancy firms’ VAT reclaim hopes dashed as Mirror loses legal battle

The publisher now intends to take the case to the Court of Appeal and predicts a success could prove a landmark providing many firms with the basis for claiming millions of pounds back from Customs and Excise.

The High Court threw out Mirror Group’s claim saying an issue of shares constituted ‘supplying a service’ and therefore VAT was payable.

Mirror Group is now seeking leave to appeal against the High Court ruling and involves the issue of almost two millions 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.’

Arguments over the VAT hinge 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 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 with 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.

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