Lords rule against Thorn on VAT avoidance scheme
26/06/1998 in NEWS
The company established an internal intermediary to buy cars and sell them on to sister companies within the same VAT group. These sister companies pre-paid 90% of the price of the cars without paying VAT because they were part of the same group. The intermediary then left the VAT group, at which point the final 10% was paid, this time incurring VAT. As a result, Thorn only paid VAT on 10% of the price of its company cars.
HM Customs & Excise argued that VAT should be paid on the whole of the purchase price, and the Treasury closed this loophole with legislation in 1995. A spokesman for Thorn said the company was still in discussion with Customs & Excise, because the ruling had been against the principle, rather than the technical details of the scheme, but suggested that an appeal to the European Court of Justice was unlikely.