The respondents were engaged in procuring sex for others. The appellants sought to make them subject to VAT. The Tribunal had concluded that the respondents’ business was unlawful and was outside the VAT scheme altogether. Not all the respondent’s business would be unlawful.
Held: The Sixth Directive purposes harmonisation of VAT, on the principle of fiscal neutrality. That precludes a generalised differentiation between lawful and unlawful transactions, except where, because of the special characteristics of certain products, all competition between a lawful economic sector and an unlawful sector is precluded. That had been ignored by the Tribunal. Illegal trading activity could be liable to VAT. Where there was competition between lawful and unlawful trades, for example with counterfeit goods, it would create an advantage to the criminal to exempt them from VAT. Appeal allowed.
Judges:
Justice Jacob
Citations:
Gazette 11-Apr-2002, [2002] EWHC 156 (CH)
Statutes:
Jurisdiction:
England and Wales
VAT
Updated: 23 June 2022; Ref: scu.167637
