VAT registration delays – coping strategies. By Rebecca Benneyworth

Lexis Nexis Tax Lecturer of the year, Rebecca Benneyworth looks at what businesses should do if their VAT registration is delayed.

The delays in VAT registration processing have been addressed at the highest level within HMRC, and a number of steps have been implemented to bring what is admitted to be an unacceptable situation back under control.

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Comments
Euan MacLennan's picture

Output tax before confirmation of registration

Euan MacLennan | | Permalink

I appreciate that Rebecca is merely repeating the party line on how to show VAT on sales invoices after the due date of registration but before the registration is confirmed with the issue of a VAT number, but the advice is totally impractical. The fact is that there is nothing in the rules to cope with what to do when the delay exceeds the 1 month allowed by the rules for the registration process. Trying to apply other rules to cope with a circumstance that they were not intended to cover is pointless.

There is only one practical solution for businesses which know that they are required to register and that when the registration is eventually confirmed, it will be backdated. From the due date of registration, they have to issue VAT invoices which conform with all the rules except the one about showing the VAT registration number. Most customers will never notice the omission anyhow and it is unlikely to be picked up subsequently in a sample on a VAT visit to the customer; if it is, the customer can then obtain a proper VAT receipt from the supplier and if HMRC cares to take it up with the supplier, there is a very good answer.

I appreciate that this would not have helped in Mark Asquith's case, but I wonder how the client's new accountants could have fared any better.

VAT Woes

Anonymous | | Permalink

We made application for VAt registration in Sept 2006 and was advised to wait for 12 weeks. The 12 weeks came and passed with news. We enquired again and was advised to re register for VAT as the previous registration clerk has upped his seat and gone elsewhere. We sent in all the various correspondences relating to the original registration and in June 2007 we were again advised to wait for a further 12 weeks. On the other hand I see VAT registration being issued to rogue traders and cowboys within 3 weeks. Is there discrimination here - better service to rogues and cowboys than legitimate business. Shall I advise HMRC that we will shut for business and re-register another business. HMRC has more to loose than the operator.

Comments please.

Imports from Europe.

AnonymousUser | | Permalink

One problem I have encountered recently, was in respect of a business that wished to import a substantial amount of stock from the Netherlands and from the Irish Republic. To avoid paying VAT in those regimes, the business needs a UK VAT number but it took HMRC over 10 weeks to issue the number. In the meantime, my client was losing business because he was unable to fulfil orders; the alternative would be to have made the purchases and incur the offshore VAT, which presumably would not be recoverable in the UK, thereby reducing his profit margin by nearly 20%.

HMRC's attitude when we complained about the delays was "tough"!

Rather late in the day, it occurred to me that the client could have used an import agency to purchase the goods on his behalf. The commission cost would have been outwieighed by being able to fulfil customer orders.

Not just me then.....

Anonymous | | Permalink

I have been waiting for a VAT number for 16 weeks now..... thought it was just me!!! Wouldn't mind so much, but they never phone back when they say they will. Plus, they don't seem to understand why it is a problem!!!!

Send applications by registered post

asquithandco | | Permalink

I lost an excellent client through delays at the VAT registration office; I submitted a VAT 1 by first class post and reassured the client that although the registration process was slow, it would get done eventually. The client's customers refused to pay without a VAT number. I chased the application but HMRC had not even opened the post for the date I had submitted the VAT 1. When they did open that date the application was not there! We had to reapply for registration, no special favours were forthcoming so the whole waiting game started all over again. The client was not happy a happy bunny and the up-shot was I lost them. The moral - send it registered post.

delayed vat registration

markmorley | | Permalink

HMRC would be advised to consider not asking pointless questions on m,atter that they have already been told on every application submitted which unnecessarily delay the process. Every question is another application not done.

Letter of confirmation?

nathanhamill | | Permalink

I am having the same problems with a VAT reg'n. I have asked for a letter from the VAT office confirming reg'n has been applied for and plan to affix copy of same to sales invoices & to forward copy of same to Italian importer to avoid Italian VAT - can only hope it will work. Is there no legal action that can be taken against HMRC?

What is the telephone number to call

Anonymous | | Permalink

I've sent in vat registration for a client 2 months ago. Have not hear from Newry since. I have been trying to call their 0845 number but its always engaged. Must have phoned 20 times so far. Called up national helpline and was given another number - unfortunately still nothing. I am now preparing to lose the client.

Does anyone know of a number I can call that is not constantly engaged.

Thanks

What matters is the body count

Crassus | | Permalink

I think it is too kind of Rebecca to accept that HMCE are doing 'whatever is necessary' to solve the problems of delays in VAT registrations. What they need to do is allocate more people to the job - and delayed VAT registrations have been a running sore for so long now they have had time to recruit and train up an army.

VAT Woes

Anonymous | | Permalink

Try the Complaints department at Gimsby. I have been promised a compensation for this delay. Spoken to HMCE today and they have acknowledged they have a problem with VAT registration re security checks.

Compensation?

nathanhamill | | Permalink

You've been promised compensation, Peter? How did you achieve this and what form will it take?

carnmores's picture

Rebecca its me again - can you elaborate

carnmores | | Permalink

' The delays in VAT registration processing have been addressed at the highest level within HMRC, and a number of steps have been implemented to bring what is admitted to be an unacceptable situation back under control.'

what does that mean and

' It is also fair to say, that taking their foot off the brake in terms of adequate risk analysis and scrutiny in the interests of clearing the backlog is not in anyone’s best interest,

thats rubbish i am afraid - there is no adequate risk analyisis- otherwise traders would not be in the pickle they are.

the first comment from Saint David mirrors mine , a very simple registration from an IR35 type company with one customer an international brand and we cant get a VRN and thereofre the customer cannot process the invoice and she cannot get paid. this is three months on and she has now has cancer and the extra financial worries that have been caused by Newry are a disgrace.

while i am on my hobby horse they will not let her register her address here at my offices which are also the company's registered office despite the fact that she does not work in the UK and all services are performed abroad, to compound it all it is reverse charge service provision anyway - some loss of tax eh!

the answer to all these types of queries is extremely simply - on registration all traders are given a time limited VAT no, you dont need to be a rocket science to devise such number with security features.

my company name has a slight connection with the address at Newry. Carnbane Way for them Carnmores for me - as some of you might have guessed if y0u have time for such mere triffles i come from 10 miles from Newry but in the Republic.

accordingly i would be happy to go over and work for HMRC registrations and sort them out for a period

the word i am looking for is Misfeasance

VAT registration debacle

Simon Newark | | Permalink

Rebecca has noted some practical ways to deal with the problems of delayed VAT registrations, but I am afraid that she is very optimistic if she thinks that anyone in HMRC is talking this seriously.

As VAT partner at UHY Hacker Young, we have the unfortunate need to deal with VAT registration units on a daily basis. Where we used to quote to clients a few weeks and a few hundred pounds to get their VAT number , we now quote 3 to 6 months and £1,000 to £2,000 for a basic straightforward registration. Anything that triggers a demand for more information from the box-tickers (normally irrelevant demands) or if the client is unlucky enough to trigger a full MTIC review (normally pointless and unnecessary) and we have to re-addres the question of costs.

I am unvolved in pressing HMRC through both the CIoT and the VAT Practitioners' Group and it really is like banging your head against a brick wall. They revert to their false statistics and ignore the problem. John Healey reported to the Treasury Select Committee recently that it was taking on average 38 days once the paperwork was received by HMRC. 'Received' means first looked at which is at least a month after they physically receive it and '38 days' means business days (ie, 7 to 8 weeks), but they forgot to mention that definition.

Finally on the matter of Complaints, my respect to the commentator who might get some compensation. Most don't. Official policy as advised to the Complaints Unit is that registration delays are no longer regarded as a complainable matter because ...all taxpayers are being equally delayed and no one taxpayer can complain they are being unfairly disadvantaged.... I jest not.

I'm going down the pub.

RebeccaBenneyworth's picture

I've been busy

RebeccaBenneyworth | | Permalink

Sorry to those who have asked for a bit of follow up on this - I have been lecturing in parts that the Orange Mobile office doesn't reach!

I can provide a bit more information about my comments. I have been lecturing over the last few months with senior members of HMRC at a number of venues. One such Board member was openly apologetic to practitioners about the delays and explained in some detail the number of factors which had created the very severe delays now applying.

This issue has been discussed at Board level, the root causes identified and remedial action for each put in place. That was the gist of my article but space dictated that I couldn't go through every last bit of her explanation. Suffice to say that around four key factors were in play, one of which was staffing - the staff recruited as a result have now completed their training, I understand and will be "on the case". Another issue has been a risk assessment tool which is selecting many more cases as high risk than was expected - this is being re-engineered urgently. The individual concerned also quite openly stated that she would not lie to practitioners and tell them it would be sorted immediately when she knew that to see any real progress would take until "early autumn".

Given the estimated yield from fraud at around £2 - 3 billion a year, I for one would prefer HMRC to continue to police the system diligently rather than react to this problem by removing the risk controls - which as I have indicated, have in part contributed to the extreme delays.

I was impressed by the serious attitude taken at Board level to this very damaging problem, and that was what I was trying to communicate in my piece, as well as to offer some suggestions as to how businesses might go forward in the interim. It is easy to gain an impression from staff on the ground that nothing is being done so I felt it would be useful to practitioners if I could share the extra information that I had gained.

carnmores's picture

Simon

carnmores | | Permalink

I take as dim a view of your practices as those of HMRC .

to charge an extra £1,000 for a registration seems to be ludicrous, i thought a professional firm like yours was selling a service not just time.

i suppose your staff mark up rates are pretty high to! you sound more like an avaricious ambulance chasing lawyer than an accoumtant.

no wonder people are turning to unqualified accountants.

dont go down the pub go the whole hog and buy it

as you guessed i am not in the best of moods today but there are serious points at issue here.

Oh Dear....

Simon Newark | | Permalink

First, if someone is in a bad mood then they really should not attempt to write constructiively about very complex issues nor insult fellow practitioners.

Second, yes our hourly rates are high but we are a national top-20 firm, so what does he expect? We manage the entire process for our clients and incur timecosts in doing so. Most top-20 firms are now quoting those sort of figures for VAT registrations.

Third, what are advisers supoosed to do if HMRC's inefficiencies and incompetence force significant extra costs onto us? Do we write the costs off or do we reluctantly pass them onto our clients? VAT is a very cheap tax to collect & HMRC don't really care about the cost burdens being forced on to taxpayers.

Fourth, I object to both me and my firm being compared to ambulance-chasing lawyers. Yes, some accountancy firms do ramp up issues, or create fictitous needs for expensive VAT reviews, or sell dubious avoidance schemes and then charge more for defending the inevitable challenge from HMRC. UHY Hacker Young does not have that sort of reputation and our charges for specialist services are lower than most of our immediate competitors.

Fifth, One of the problems we face at the lower-end of the mid-tier sector is clients wanting to get a top-20 service yet only wanting to pay fees appropriate to back-street accountants. Such unqualified advisers who think they have the expertise to advise clients in the modern world should go back to the call centres or mini-cabs that they came from and leave professional work to people like all of us who take our professional responsibilities seriously.

Sixth, Mr Myles is quite right that there are some very serious points here, but in relation to the atitudes of the State to the business affairs of legitimate taxpayers and the ever-increasing administrative and cost burdens being forced onto HMRC's army of unpaid tax collectors - our clients. That is why the ICAEW, the CIoT (my institute), the IIT, the VPG, and several trade bodies and other profesional organisations are all hammering HMRC through every forum they can to try and break through HMRC's head in the sand attitude on VAT registrations. It is very good that Rebecca's contact seems to be taking the matter seriously, but it is still getting worse and worse day by day and nothing seems to be improving yet. HMRC had sufficient staff before (just), so why are they suddenly so short? Also, if staffing (resources) is a problem, why are they planning to close Newry for 'efficiency savings', aka cut-backs.

And finally, after three very pleasant pints with some old colleagues, I shall leave the pub in the very capable hands of the publican who is good at what he does in the same way that I am good at what I do. I could not serve decent beer and he could not give advice on VAT matters. Having said that, perhaps he could start-up as an unqualifed adviser? I am sure he could undercut both mine and Mr Myles' charges!

carnmores's picture

Thanks Rebecca

carnmores | | Permalink

I take everything that C&E say with a bucket of salt

why didnt they admit and apologise publicly rather than go thro all these shenanigans.

a huge smoke screen has been erected this risk modelling arguement is non sense, it is their model their fault compounded by poor and or late training. i suppose they risk assessed the implementation of the risk assessment module

even the monster raving loony party (why is there only 1 monopolies commission) wouldnt promote such a scenario

i understand that thsi is only the second time in public life that on the merger of 2 organisations that the senior service has been demoted ie HMRC not HMCR..

anybody know of the other case

Hacker Young is selling a service; it is just that more service

AnonymousUser | | Permalink

I admit that Simon Newark's arrogant and self-important tone makes one reluctant to defend him, but I think if HY are doing more work for the client they should be able to charge for it. Why should we suffer for the Revenue's failings? I accept that the client should not suffer either, but that is not our fault.

Incidentally, I loved Simon's phrase "top-20 service", and the implication that it is better than the service than one would receive from a smaller firm. Can we assume, then, that the service received from Hacker Young is inferior to that received from 19 other firms in the UK?

Give a guy a break...

Simon Newark | | Permalink

Hey Guys, give me a break. Nicholas had a pop at me and am only defending what we do.

In many cases we do provide a lesser service than larger firms (or couldn't provide the service in the first place) because we haven't got the resources or the experience in dealing with the largest businesses or their transactions. Often though we can compete with larger firms to provide an equally good service but at a better price.

In equally as many cases we can provide a better service than smaller firms not because we are bigger and therefore must be better, but simply because we have more specialists on-board who do nothing but corporate tax or income tax or VAT, etc. There is a price attached to that of course which can be too steep for our smaller clients and we do the best we can within their budget. I accept also that in many cases we provide a comparable service to that provided by smaller firms and have to compete on price with them which can be very difficult for us.

The costs I highlighted are what HMRC is forcing onto advisers in the full knowledge that the bureaucratic paranoid process we have now within HMRC would drive most businessmen and women trying to do it themselves to drink.

What we should do each is through our own forums keep on hammering away at HMRC until they see the sense in working with us not against us. After all, we (all of us) do police the tax for them and do a very good job with very little recognition or thanks from HMRC.

vat registration

fredferdosian | | Permalink

what about businesses who's turnover is few times over the threshhold and still refuse to register by means of either false declaration or putting the business in reletives name at regular intervals,this gives these people a huge advantage over the poor vat registered rival, is a very common practice in newcastle where my business is.

vat man don't seem to be bothered as large percentage of hot food takeawaya are not registerd.

surely the least vat man can do is to provide us (the free vat collectors) with level playing field.

needless to say same guys don't pay proper wage neither as its all cash in hand

just trying to survive

fred ferdosian