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Anonymous VAT penalty notifications

14th Apr 2023
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Indicator - FL Memo is part of a leading European publishing business and has been producing...
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A new system has been in operation since 1 January 2023 for policing late VAT returns and payments. Instead of the old default surcharge, there is now a points-based system leading, when sufficient points have been accrued, to a flat-rate penalty for late submission. Late payments are subject to interest and, potentially, tax-related penalties. When a return is late a point is “scored” and the trader is notified in writing.

VAT
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Question or nominate?

A trader may nominate an agent to deal with HMRC on its behalf; a nominated agent is routinely sent a copy of the points-scored notification. This is a paper copy in a window envelope. However, HMRC has been informed that in some cases it is possible to see the client’s name at the edge of the envelope window. This is, apparently, a breach of GDPR (the data protection rules). What should HMRC do?

  1. Argue that this is not a breach of GDPR (spoiler alert: nobody ever takes this route, as it is a “well-known fact” that everything is a breach of GDPR, so it is simultaneously an unavoidable problem and a perfect excuse not to do something obvious and sensible that you just don’t want to do).
  2. Redesign the notification letter so that the client’s name appears slightly lower down the page and out of potential conflict with the window (in other words, put a couple of line breaks into the notification template).
  3. Remove the client’s name from the letter so that the agent receives a notification with no indication of the name of the client to which it refers.

No prizes for guessing that HMRC has plumped for option 3

Somewhere else in the notification, the client’s VAT registration number is included, so agents who have the ability to search their client database via the VAT number field can find out the name of the client and, presumably, write it on the letter.

On reflection, HMRC is going to redesign the notification letter. How?

  1. Put the client name somewhere out of range of the envelope window.
  2. Or, from May onwards, add to the notification letter a recommendation that agents use the VAT registration number on the letter to discern which of their clients it relates to.

No prizes again. But to add a final sting in the tail, HMRC has, it seems, chosen option 2 advisedly:

“We have acted on agent feedback to improve our letters and will be making more improvements to the design of the new VAT penalty notices to meet agents’ needs.”

Silly old agents. Why didn’t they ask HMRC to choose option 1?

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