D&A loses VAT battle

Dollond & Aitchison has lost its battle with Customs in the European Court over the tax it pays on contact lenses imported from Jersey for UK patient use (News, February 11 2005).

HM Revenue & Customs said that the decision by the European Court of Justice confirmed its view that 'VAT is due on the full price paid by the customer'. It claimed that it was a significant decision demonstrating HMRC's determination to counter VAT avoidance.

According to a spokesman for HMRC, D&A maintained that the price paid by UK patients for imported lenses related both to the supply of the goods and a VAT-exempt supply of dispensing aftercare.

HMRC disagreed, insisting that it was a single supply and that tax was payable on the full amount. The European Court found in its favour.

D&A issued a statement saying it was 'very disappointed' with the decision. It said that the court ruled against D&A's attempt to recover VAT believed to have been overpaid during the two-year period - July 1999 to June 2001 - when the circumstances of the proceedings existed.

'The ruling has no financial impact on Dollond & Aitchison as VAT has been fully accounted during this time,' said a company spokeswoman.
The Forum of Private Business, which is fighting the Channel Islands tax loophole on behalf of small businesses, said that it proved that HMRC was 'baring its teeth'.

CDs and DVDs imported by the likes of Tesco and Amazon from the Channel Islands have come under scrutiny from smaller businesses which cannot compete on price.

But Paddy Behan, VAT director at Grant Thornton said, 'This decision does not by itself cast doubt on the application of the VAT concession for small imports. If HMRC had not won this case on the technical analysis they would probably have tried to argue for the application of the "abuse of rights" doctrine which was applied in the Halifax case earlier this week.'