Ancient and Modern Ltd (A&M), a Blackburn-based jeweller, has been ordered to pay £5m in VAT fraud after a High Court ruling found that the company deliberately rendered inaccurate VAT returns. The company, which operates an appointments-only shop in New Market Street and storage facilities elsewhere, had challenged a £5m VAT assessment for trading between 2014 and 2018.
The assessment was issued by HM Revenue and Customs (HMRC) after an investigation into the company’s use of a second-hand margin scheme for VAT. The scheme, which allows businesses to account for VAT on goods re-entering a commercial taxation chain, was used by A&M to account for VAT on watches purchased by way of intracommunity supply and imports. However, the court found that the company had deliberately misused the scheme, rendering inaccurate VAT returns and failing to comply with the scheme’s conditions.
The court heard that HMRC had issued an assessment of £5.474,249, which was later reduced to £5,004,598 on review. A penalty of £2,802,573 was also issued, representing 56% of the tax considered to have been lost through the company’s deliberate but not concealed conduct. The penalty was reduced from the maximum 70% due to the company’s cooperation with HMRC and its willingness to rectify the errors.
A&M’s director, Zachary Coles, had argued that the conduct of the investigating officer was unreasonable and that the assessments were overstated. He claimed that the errors in the VAT returns were not deliberate and were instead innocent mistakes or careless. However, the court found that the assessments were raised in exercise of HMRC’s “best judgment” and that A&M had failed to satisfy the court that the assessments were overstated.
The court also found that A&M had deliberately rendered inaccurate VAT returns, and that Coles was aware of the compliance conditions of the scheme but chose to ignore them. The court’s ruling is a significant blow to A&M, which has been ordered to pay the £5m assessment and the £2.8m penalty. The company has 56 days to appeal the judgment.
The case highlights the importance of accurate and compliant VAT returns, and the potential consequences of failing to comply with VAT regulations. Businesses that fail to comply with VAT regulations can face significant penalties and assessments, and may also be subject to criminal prosecution. The case also highlights the importance of international cooperation in tax enforcement, as the investigation into A&M was triggered by an Italian tax authority enquiry over the sale of Piccinini watches.
HMRC’s investigation into A&M was a complex and lengthy process, involving the review of thousands of pages of documentation and the analysis of large amounts of data. The investigation was carried out by a team of HMRC officers, who worked closely with the Italian tax authority to gather evidence and build a case against A&M.
The court’s ruling is a significant victory for HMRC, which has been working to combat VAT fraud and protect the UK’s tax base. The case sends a clear message to businesses that HMRC will take action against those that deliberately misrepresent their VAT returns, and that the consequences of non-compliance can be severe.
In a statement, HMRC said: “HMRC takes VAT fraud seriously and will take action against businesses that deliberately misrepresent their VAT returns. We welcome the court’s ruling and will continue to work to protect the UK’s tax base and ensure that businesses pay the correct amount of VAT.”
The case is a reminder to businesses of the importance of accurate and compliant VAT returns, and the potential consequences of failing to comply with VAT regulations. It is also a reminder of the importance of international cooperation in tax enforcement, and the need for businesses to ensure that they are compliant with VAT regulations in all jurisdictions in which they operate.
In conclusion, the case of Ancient and Modern Ltd highlights the importance of accurate and compliant VAT returns, and the potential consequences of failing to comply with VAT regulations. It is a reminder to businesses of the importance of international cooperation in tax enforcement, and the need for businesses to ensure that they are compliant with VAT regulations in all jurisdictions in which they operate.