THE House of Lords has ruled against Thorn UK in the electrical giant's long running battle to operate a VAT avoidance scheme for its company car fleet. Thorn had used a VAT grouping scheme to limit the amount of VAT it paid on its 3,000-strong fleet.
The company established an internal intermediary to buy cars and sell them on to sister companies within the same VAT group. These sister companies pre-paid 90% of the price of the cars without paying VAT because they were part of the same group. The intermediary then left the VAT group, at which point the final 10% was paid, this time incurring VAT. As a result, Thorn only paid VAT on 10% of the price of its company cars.
HM Customs & Excise argued that VAT should be paid on the whole of the purchase price, and the Treasury closed this loophole with legislation in 1995. A spokesman for Thorn said the company was still in discussion with Customs & Excise, because the ruling had been against the principle, rather than the technical details of the scheme, but suggested that an appeal to the European Court of Justice was unlikely.
The company established an internal intermediary to buy cars and sell them on to sister companies within the same VAT group. These sister companies pre-paid 90% of the price of the cars without paying VAT because they were part of the same group. The intermediary then left the VAT group, at which point the final 10% was paid, this time incurring VAT. As a result, Thorn only paid VAT on 10% of the price of its company cars.
HM Customs & Excise argued that VAT should be paid on the whole of the purchase price, and the Treasury closed this loophole with legislation in 1995. A spokesman for Thorn said the company was still in discussion with Customs & Excise, because the ruling had been against the principle, rather than the technical details of the scheme, but suggested that an appeal to the European Court of Justice was unlikely.
Login to comment
Comments
No comments have been made yet.