Watch shop fined £2.8m after VAT probe

Ancient and Modern Jewellers Limited went into liquidation last year

A shop has been fined more than £2.8m for not paying VAT on luxury watches it bought and sold.

Ancient & Modern Jewellers Ltd in Blackburn, Lancashire, was found to have misused a VAT exemption scheme for second-hand goods.

An investigation was launched in 2017 after a referral from the Italian tax authorities, alleging the company might be involved in a tax fraud.

An His Majesty's Revenue and Customs (HMRC) investigation found the firm had avoided about £5m in tax between 2014 and 2018 in what was described as "deliberate but not concealed" conduct.

The case involved the use of a VAT discount scheme applied to second-hand goods, on which firms can be eligible to pay a lower rate.

'Careless'

Only second-hand goods previously owned by a "non-taxable person" are eligible for the scheme, but the HMRC investigation found that claims were being made against new watches.

A First Tier Tax Tribunal found in 2024 that "based on the evidence of [Ancient and Modern Jewellers' boss] Zachary Coles, we consider that he closed his mind to the possibility that the goods he was being sold by intermediaries were new and had never entered the chain of consumption".

The judgement said: "[Mr Coles] accepted the description of the goods as preowned or used but was principally interested in selling only watches that were in exceptional condition and looked unworn.

"It appears to us that the most likely scenario in which a watch looks unworn is when it is new."

The judgement recorded that the firm had said the errors were "at best innocent mistakes and, at worst, careless".

The company, which started voluntary liquidation proceedings in 2024, opened its first shop in Blackburn in 1943, according to its website.

HMRC said the firm had defaulted on £5,004,595 and had to pay a penalty of £2,802,573.20.

The BBC has attempted to contact Ancient and Modern Jewellers for comment.