UK customs authorities struggling to contain ballooning VAT fraud have won a partial victory in the European Court of Justice.

In a preliminary ruling yesterday, the judges decided that traders caught up in carousel frauds could be held liable for unfair VAT anywhere in the trading chain, if they had “reasonable grounds” to believe a scam was being carried out.

But they also said that “traders who take every precaution…must be able to rely on the legality of those transactions without the risk of being made jointly and severally liable to pay the VAT due from another taxable person.”

The decision came in a case between the UK’s Commissioners of Customs & Excise together with the Attorney General, and the Federation of Technological Industries and others. FoTI had asked for a judicial review of parts of the 2003 Finance Act designed to combat missing trader fraud, by making all parties in a trading chain “jointly and several liable” for the VAT. Industry has argued that legitimate businesses have had VAT refunds withheld when they have become unwittingly caught in carousel and missing trader frauds.

So, something to please everyone then. HMRC gets to keep one of the more fearsome weapons in its VAT fraud armoury, while legitimate traders caught out by scamsters have the comfort of knowing the revenue men must be more discriminating in how they use it.

Earlier this week, The Guardian claimed that VAT losses to missing trader fraud in the last financial year were £5bn, and will hit £7bn this year. HMRC has rubbished those figures.