Sports Direct has been contacted by the European Union Tax Authority, in a VAT matter which could result in a controversial settlement between founders Mike Ashley and John Ashley.
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Under-declared VAT from Sports Direct
Documents filed at the High Court have revealed that Frasers Group formerly named Sports Direct came under fire in Ireland, France, and Finland, over arrangements that involved VAT in the UK on all sales to customers that VAT was not applicable for a seven-year period. The arrangement involved setting up a separate company called Barlin Delivery. Which had no external resources such as drivers or trucks but rather John Ashley to deliver orders abroad.
Sports Direct’s comments
The Fraser Group have gone on to say “As we have repeatedly stressed, the group is adopting a fully cooperative approach with HMRC and that the VAT was paid in the correct place” as well as “That process is not yet complete – progress has been slowed by the ongoing pandemic – but we hope and expect that it will be completed soon.”
Furthermore the Fraser Group said it set up Barlin to reduce administrative complexity as it expanded in the EU and not as a way of reducing VAT. It strongly denied it was involved in any sort of tax avoidance or minimisation scheme.
The Rules
VAT should be applied on cross-border purchases delivered “by or on behalf of” a retailer should be paid to the tax authority in the country where the buyer lives. In other words, if the retailer arranges transport, the sale is regarded to have taken place in the buyer’s country of residence. However, if the buyer arranges collection from the UK, the sale is deemed to have taken place in the UK. Such arrangements fall into the remit of Article 33 of the Principal VAT Directive.
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If you need VAT Tax Disputes advice, we are available to aid you at every stage of the VAT appeals process. Members of our legal team have first-hand experience and working knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations, throughout the VAT review process and in front of the Tax Tribunal. Our team specialises in successfully challenging TAX decisions, submitting out of time appeals, and will assist you in every aspect including developing a strategy.
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