Tax & Accounting News

VAT delays far from over

13/06/2007

Almost ten months after VAT registration delays were first noted and criticised, the situation is far from showing any sign of improving.

Back in October we advised local businesses that they could be waiting up to 12 weeks in becoming VAT-registered, due to a crackdown on fraudulent VAT registrations by HMRC. However even now little has been done and the system is being increasingly criticised by key figures, including the influential Lords European Union committee who comments that although fraud has been reduced, the new extended verification system is inefficient.

The position is likely to worsen significantly in the near future, with the announcement of the closure of the Newry VAT registration office, due to a commitment to reduce staff levels! Matters are also being exacerbated by an extra 20,000 registration applications due to the provisions in the 2007 Finance Bill in relation to managed service companies.

Barry Lewis, senior partner, comments: “As with everything there needs to be a balance here. Revenue and Customs must take steps to reduce VAT fraud, however the lengthy delays that this is causing to the average business person who does not fall under any high risk category, is simply not acceptable.

“The vast majority of businesses are perfectly legitimate and many are trying to legally register themselves for VAT to avoid acting illegally. However these type of problems are only likely to deter people from even registering, which will then lead to more fraud. The innocent really are being punished.”

The problems are occurring for SME’s when they reach turnover of £64,000 and are then required to register for VAT. With the VAT Number taking months to come through, the business has to issue one invoice at the time of supply, including an amount equivalent to VAT and then when the VAT Number is issued, send the customer a further “account only” invoice stating the VAT Number which will then enable the customer to reclaim the VAT equivalent to the VAT charged on the first invoice.

Barry concludes: “The only advice I can offer is for anyone setting up a new business to apply for VAT registration well in advance of the intended start date, hopefully this will give the slow Revenue time to play catch up.”

For more information please contact us on 020 8446 9000.

 

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