THORN UK has lost a long-running legal battle with the VATman over a tax-avoidance scheme in the Court of Appeal. The electrical giant, which has a fleet of more than 3,000 cars, said it would consider appealing to the House of Lords after the Appeal Court ruled against a scheme which reduced Thorn's VAT liability on company cars by 90%.

Thorn started using the so-called 'grouping' scheme in 1994 (Fleet News, January 6, 1995) and subsequently won a case at a VAT Tribunal when Customs challenged the practice. The scheme was based on an internal intermediary company buying cars on behalf of Thorn and selling them on at 10% of their value - thus reducing Thorn's VAT liability by 90%.

The Treasury subsequently closed the loophole allowing the scheme with legislation (Fleet News, March 10, 1995) while Customs continued the fight against Thorn's use of the scheme through the courts.