Retailers celebrate as the VATman stumps up

THE RARE sight of large dollops of egg on the face of the VATman has been seen in and around the High Street recently after an avalanche of refunds for wrongly charged VAT has been handed back to retailers and mail order firms.

Home-shopping group N Brown was the latest retailer to reveal a sizeable sum entering its coffers after it disclosed in recent half- year figures that Customs had agreed an GBP 8.6 million VAT rebate .

In total, a bloodied Customs has confessed it has had to repay a staggering GBP 352 million, most of which has been handed back to the nation's shopkeepers. It is all hugely embarrassing for the hard- nosed Government agency, more accustomed to wringing money out of recalcitrant VAT payers than having to refund large sums to blue- chip companies. John Lewis chairman Stuart Hamp-son even dubbed the rebates the retail sector's own windfall bonanza and has asked staff at the employee-owned company how to spend the GBP 30.2 million it won back from Customs. He wants suggestions for celebrating the group's golden jubilee in 2000, 50 years after founder Spedan Lewis transferred his interest in the business to the staff. Other beneficiaries of the bonanza include Marks & Spencer, which obtained GBP 53 million, Littlewoods -GBP 26.6 million - Sears, through its Freemans operation, GBP 22.2 million and Grattan with GBP 11.8 million. Empire Stores was repaid GBP 11 million and Next GBP 8.8 million. However, one dour tax specialist was quick to scotch the impression the beneficiaries have uncorked the champagne. "It was our money in the first place and it has cost a fortune in legal fees, so we're still unhappy," he said. It was Littlewoods who led the charge against Customs, securing a key victory in the Court of Appeals in March on behalf of several retailers that opened the floodgates for the repayments. Customs denies it has committed a monumental blunder. "There were contradictory verdicts in the courts but we have been given guidance by them now and we know where matters stand," said a spokesman. The problem dates back five years or longer - although VAT experts would argue it goes back to the first days of VAT in 1973 when Customs made special provisions for retailers on how to account for VAT. But in 1996, a fundamental change in the Budget was introduced on when and how VAT could be charged for goods sold on credit. This hit mail order firms the worst, although the likes of M&S and John Lewis, with their own in-house credit businesses, were also hurt. Instead of charging VAT when the firm received payment on goods sold, Customs could demand the tax from them when the customer ordered the goods. With mail order firms and in-store credit providers, therefore, Customs was suddenly able to extract a massive one-off upfront payment on outstanding balances. The court decision, however, means that matters revert to the old system of doing things.

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