HMRC could face legal challenge over VAT rules

News Article - Thursday, August 31, 2006

filed under: Regulatory

Legal action could be launched against HM Revenue and Customs (HMRC) after the tax body used new powers to withhold VAT payments from some companies, it has been reported.

A number of IT traders are taking legal action against the HMRC, according to industry news provider CRN.

According to a "HMRC representative" who spoke to the channel, several such traders are seeking judicial reviews, while a High Court case has been adjourned until late September.

"Some traders are challenging HMRC's withholding of repayment of tax, pending an extended verification of the claims," the representative said.

Despite the criticism it has faced, HMRC claimed that its actions were justified, describing the withholding of VAT as "a necessary and proportionate response to the threat that organisations wittingly continue to trade in transaction chains that defraud the Revenue".

Others suggest that the body is under a legal obligation to hand the VAT payments over.

"HMRC is denying traders their legal entitlement to VAT paid out," Anthony Elliot-Square, chairman of the Federation of Technological Industries, told CRN.

"Therefore, traders are well within their rights to pursue it through legal routes."

track © Adfero Ltd