Dollond & Aitchison has lost its European Court case with HM Revenue & Customs relating to the tax it pays on contact lenses imported from Jersey to patients in the UK.
D&A issued a statement saying it was ‘very disappointed’ with the decision handed down by the European Court of Justice yesterday.
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.’
A spokesman for HMRC said: ‘This decision confirms HMRC's view that VAT is due on the full price paid by the customer. This is 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 relates 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.
A spokesman for 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’ and was looking to crack down on the loophole.
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.
‘Due to the increased use of this concession, and criticisms of it from certain onshore retailers, I think it is a racing certainty that HMRC will run an abuse argument in a case very soon.’