18 April 2009

Will Unwitting Evaders Be Shamed?

The Guardian reports that, "Alistair Darling to publish blacklist of UK's biggest tax evaders."

"Tax cheats who deprive the exchequer of sums greater than £25,000 are to be named and shamed by the government in a crackdown on evasion to be unveiled by Alistair Darling in the budget on Wednesday.

The chancellor will announce that Revenue & Customs will publish a blacklist of individuals and companies deemed to be serious defaulters, and force small businesses to provide extra information for five years if found guilty of tax offences.

Yet, earlier in the week, care of Current Awareness, we had the story from Out-Law saying that,

"A court ruling has thrown into doubt a company's right to reclaim VAT relating to goods that it later repossessed. The ruling could undermine the usefulness of businesses retaining the right to repossess goods they supply to other businesses."

The article explains that Ford sold some cars to a dealership and as is customary in commercial contracts, Ford held on to the legal ownership of the cars until it had been paid.

Unfortunately, the dealership went bust but Ford were still liable for the VAT to be paid on the cars. In this particular case, "[t]he Court said that the facts uncovered by the Tribunal were not sufficient to make a definitive ruling."

So, Darling's proposals, as reported above, will not be as simple or as fair as they first appear. On the face of it, Ford would be one of the companies to be named and shamed. They are quite sensibly avoiding the payment of tax because they believe that they don't owe it.

What happens if this happened to a company that was smaller than Ford?

Or rather, this happens to companies all the time. They think twice about submitting invoices to failing companies because they don't want to be liable for the VAT on those invoices. But now there may be the extra burden of being named and shamed.

Think again, Darling.

Brunel Motor Company Ltd v HM Revenue & Customs & Anor [2009] EWCA Civ 118

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