OLAF has calculated a loss to the EU budget of almost EUR1.9bn [US$2.24bn) in unpaid customs duties

OLAF has calculated a loss to the EU budget of almost EUR1.9bn [US$2.24bn) in unpaid customs duties

The UK Government is to dispute a multi-billion euro charge handed to it by the European Commission in relation to alleged unpaid duties on Chinese imports of clothing and footwear over several years.

Brussels formally notified the UK of its intention to recover the duties in March this year. In its 2017 annual report, published last week, European Union (EU) anti-fraud agency OLAF said that concerning goods cleared in the UK, its year-long investigation had calculated "a loss to the EU budget of almost EUR1.9bn [US$2.24bn) in customs duties." It added the probe had "also revealed a substantial VAT evasion, estimated at approximately EUR3.2bn for the period between 2013 and 2016."

The UK's tax authority, Her Majesty's Revenue & Customs (HMRC), has confirmed that it is disputing the size of the claim. Jon Thompson, HMRC's accounting officer, said: "HMRC is analysing the detail of [OLAF's] report, but does not agree the calculations or recognise the conclusions drawn by OLAF and will respond to this report in due course."

However, a spokesperson for the department would not say that the UK denied OLAF's claim outright.

A spokesperson for OLAF, told just-style that the procedure to reclaim the duties was "ongoing," but could not comment on details.

But a Brussels source familiar with the matter said the case is likely to end up in the European Court of Justice (ECJ).

In its annual report, OLAF claims "the UK attracted far more of the fraudulent traffic in textiles and footwear than any other [EU] Member State" during the period in question, due to a "lax" regime of controls that allowed fraudsters to import Chinese clothing into the country under false invoices, stating they were worth a fraction of their true cost.

The UK Fashion & Textile Association (UKFT) did not respond to requests for comment on the issue and has so far not issued any statements. Its European counterpart, Euratex, has also been reticent, as has the British Fashion Council.

The UK clothing industry is eager to maintain trade and skills links with Europe post-Brexit, while China's "huge population and potential spending power" has been highlighted by a UKFT note as "one of the world's newer and most challenging markets" for British fashion.