Mobile phone trader CCA Distribution Limited has been thrown a lifeline after winning a legal appeal against HMRC’s decision to withhold VAT re-payments worth about £10m. The victory for the business, which is in administration, is likely to encourage other traders who have similar tribunal appeals against HMRC.
HMRC claimed that the Stockport-based business knew that it was part of a “contra trading” fraud relating to handsets traded in the UK and Europe between April and June 2006.
Under contra trading fraud, a variation of “missing trader” fraud, people try to evade VAT by participates in two separate types of transaction during the same VAT period. One of the transaction chains is legitimate, the other isn’t. The output tax from one chain is designed to off-set the input tax incurred on the other chain.
VAT fraud is estimated to cost...