UK owes EU money over customs fraud, court rules

The UK faces making a potentially hefty payment to the EU after its top court ruled it did too little to prevent fraud on imports of Chinese clothing.

European judges said HMRC failed to pass on the correct amount of tax revenue to the EU on imports between 2011 and 2017.

The European Commission took legal action in 2018, arguing it was owed €2.7bn (£2.4bn).

The UK government said it would respond to the judgement "in due course".

The UK was accused of taking inadequate steps to prevent fraud after it was warned about the problem by the EU's watchdog, Olaf, in 2017.

EU member states had been warned by Olaf about the risk of undervalued clothing and footwear coming from China via shell companies.

In a ruling on Tuesday, the European Court of Justice (ECJ) upheld the commission's claim the UK had not paid the correct tax revenue to the EU.

However, it did not agree with how the commission calculated what exactly it is owed. The commission will now have to recalculate a final claim.

EU members have to pass on a share of the taxes that they collect on imports to the commission, as part of their contribution to the EU budget.

The BBC has asked the commission for a comment.

A UK government spokesperson said: "Throughout, we've made the case that we took reasonable and proportionate steps to tackle the fraud in question and that the Commission vastly overstated the size and severity of the alleged fraud.

"The UK has always and continues to take customs fraud very seriously and evolves its response as new threats emerge."

The UK cut formal ties with the EU in January 2021, following an 11-month transition period after it officially left the bloc.

However, the ECJ retains the power to make rulings over cases relating to how the UK applied EU law before Brexit took place.