The European Court of Justice is dut to deliver its verdict tomorrow on whether UK mobile phone companies are eligible for millions of pounds of VAT repayments from the UK government.
The decision will be the latest chapter in a long running story, which has been ongoing since the UK government cracked down on traders who were buying phones duty free from an EU memeber state and then selling the phones on through a circle of firms in the UK, claiming VAT repayment from the government on the sales.
Fraudlunet firms would then disappear without accounting for the VAT repayments that received. Some estimates are that this cost the UK revenue and customs (HMRC) billions.
To stop this fraud the HMRC made it difficult for all companies trading mobiles to claim back VAT. Companies that considered themselves legitimate and unfairly caught up in the crackdown challenged the process in a test case in 2003. But the challenge (Bond House vs The Commissioners of Customs & Excise) was unsuccessful.
The challenge was then taken to the European Court of Justice.
A decision to overturn the UK court verdict could leave the Government looking at a bill for millions of unpaid VAT returns.
Some of the companies also consider that they were deliberately targeted by HMRC, rather than the known orchestrators of the fraud (known as carousel frauds). A spokesperson for DLA Piper, the lawyers acting for a number of the companies claiming they were unfairly treated by HMRC, said thre is likely to be a number of claims on this latter issue, for greater amounts than the VAT repayments.
When the judgement is delivered, Mobile Europe will have a statement explaining its impact for the mobile phone market from Hartley Foster, tax investigations expert at DLA Piper.