The European Court of Justice (ECJ) has ruled that the UK had been negligent in allowing criminal gangs to flood EU markets via UK ports with cheap Chinese-made clothes and shoes. The European Commission estimated that the UK owed the bloc €2.7bn in lost duties and VAT.

ECJ judges ruled that the UK was negligent in its approach to applying EU customs rules between 2011 and 2017, resulting in lost revenue to the EU in both customs duties and VAT.

According to a statement from the court, the European Anti-Fraud Office (OLAF) had warned member states three times to be aware of the risk of extreme undervaluation of imports of textiles and footwear from China by shell companies registered for the sole purpose of giving fraudulent transactions the appearance of legitimacy.

It advised on using standard EU-wide risk indicators and tariffs.

UK customs officials opted for their own method of calculating the value of the goods. EU authorities warned that such a methodology was inadequate. It resulted in "the shift of fraudulent operations from other member states to the United Kingdom".

The Court did not agree with how the commission calculated what exactly it is owed and the claim will have to be recalculated for the final claim.

The UK government said that it would consider the judgment in full and respond in due course.

Useful guides on this topic

Place of supply: Goods
The place of supply (POS) of goods determines whether the supply is within the scope of UK VAT and whether VAT is payable on that supply.

International goods
Special VAT rules apply to goods bought from and sold to non-UK businesses.

Importing goods into GB from 1 January 2021
The post Brexit transition period ends on 31 December 2020. HMRC has issued guidance for importing goods.

External links

ECJ Press Release

ECJ Case number = C-213/19 from Curia

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