VAT challenged

By James Dunworth

A VAT challenge on electronic cigarettes in the U.K. aims to break the mold of ever-increasing taxes on the sector by calling for a drop in Value Added Tax to 5 percent.

The challenge, led by U.K. accounting firm MHA MTaxco, has brought together both larger retail firms and smaller independents to raise funds for the challenge, with an initial meeting with the Revenue and Customs department (HMRC) scheduled to take place shortly. If negotiations are not successful, the case is likely to proceed to a tribunal in 2019.

In response, HMRC are likely to argue that e-cigarettes are not licensed for quitting, and are not held out for sale as a quitting aid. However, the case rests on the definition of the phrase “designed to help,” which states that products that are created to help consumers with medical issues such as quitting smoking can attract a reduced rate of VAT.

If successful, the case would also lead to re-payments of VAT for electronic cigarettes products sold since 2015.

James Dunworth is the co-founder of E-Cigarette Direct. You can find him blogging at the Ashtray Blog.