Member Since: 30th May 2000
26th Jul 2019
I hate to go against the grain here, but this is in practice one of HMRC's better ideas. If most of the output VAT is reverse charge, the exposure to penalties for most businesses affected in relation to their supplies is almost eliminated, for the simple reason that even if they applied the wrong VAT rate, there is no tax lost. There is a small downside in having to finance VAT on purchases, but this is offset by being able to transfer to accrual accounting. Then, from the point of view of HMRC (and the rest of us) no longer will the likes of Carillion recover ALL the input VAT on purchases, for which they have not paid and then go bust, followed by the suppliers having to minimise their losses by claiming bad debt relief. In addition, by removing cash from the equation, missing trader fraud (where it exists) is completely eliminated.
16th Jun 2018
This proposal has a number of advantages. First, it reduces the risk of errors resulting in penalties because the wrong rate of VAT has been applied. Secondly, once the contractors get used to the system, they will if dealing primarily with larger contractors, no longer have to find a large amount of VAT to pay each quarter. Finally, in the event of another Carillion, the amount of VAT lost by HMRC (and their subcontractors) as a result of that failure will be significantly reduced.
10th Oct 2014
It is the promoters of the schemes at fault, not the barristers
Having instructed tax barristers a number of times, it should be remembered that their opinions are based on the instructions given to them. If the instructions are sparse, and limited to asking their opinion on the technical validity of the scheme, it is not surprising that a barrister might confirm that the scheme works, because advice is limited to the questions asked. An unscrupulous promoter would undoubtedly word his instructions carefully to maximise his chances of getting a favourable opinion. On the other hand, if the instructions are more widely phrased, so that a full opinion is sought on both the strengths and weaknesses of any scheme, the opinion will provide that answer, and highlight areas of risk.
18th Jul 2014
HMRC have no incentive to litigate
Having experienced at first hand the delaying and stalling tactics used by HMRC in a complex VAT case - where they had to be dragged to the Tribunal and eventually lost, I think it would be safe to say that once HMRC have taken the tax up front, there will be no incentive to litigate, and risk losing. They will instead use every delaying tactic in the book, in the hope that the taxpayer will give up or run out of money. It may well have been the case that agents in the past have delayed the hearing of these cases, since it benefited their clients as regards cash flow. The reverse will now be true - the difference is that HMRC have the deeper pockets.
16th Jul 2014
Respond to the "consultation"
There is a so called "consultation" on these proposed powers and in particular the non-existent safeguards proposed. Deadline tail end of July. I will be responding, with numerous no name examples of why this does not work. While this may be a sham of a consultation, if most agents were to respond, and explain why this is simply unacceptable, the sheer volume of comments will either force them to drop it, or demonstrate that as agents we should cease all co-operation with HMRC moving forwards.
25th Sep 2012
If you lose gross status - appeal
If the worst was to happen, and the gross status lost because of HMRC delays, appeal to the Tax Tribunal. If the only reason that the corporation tax was paid late is due to either the incompetence or deliberate delay of HMRC, then you will find the Tax Tribunal bending over backwards to help you, and HMRC, if they have any sense would cave due to the potential bad publicity.
10th May 2006
HMRC have themselves to blame
Earlier this year, following the loss of the Bond House case at the ECJ, HMRC finally announced proposals to request a derogation from the EC Commission to allow the reverse charge to be applied to supplies of certain types of goods, and presumably extended to other categories if necessary. This means that instead of paying over VAT to a potentially missing supplier, the recipient accounts for it to HMRC directly through its VAT return, recovering it in the same VAT return as input VAT if appropriate. The beauty of this procedure is that VAT is only paid over to HMRC by the last supplier - i.e the retailer or the actual user of the goods. There are no refunds to be paid out by the system, and without the cash, no opportunity for fraud. The scandal is that HMRC have first of all delayed in introducing this procedure, when I know for a fact they were aware of it at least two years ago, and that they preferred to make innocent traders responisble for making up losses caused by fraud.
30th Jan 2006
validation should not be an issue
Validation of VAT numbers should not be an issue. The beauty of using the reverse charge is that it does not matter if the supplier has not registered for VAT when he should have done, input VAT must still be charged by the recipient to himself and is recoverable if he makes taxable supplies. Whether or not it applies depends on the nature of the supply, and where it comes from - thus it applies to supplies of services from non EU suppliers. If you took it to the end of the chain, HMRC would not have to bother with anyone other than either an exempt end user or the retailers.
27th Jan 2006
about time too
I have had many disagreements with Customs over the years, but this request for a derogation is in fact very good news. My only complaint is that HMRC should have done it years ago. Using the reverse charge mechanism removes all opportunity for Missing Trader fraud, since the cash which is targeted by the fraudsters is never paid out, by either HMRC or the unwitting innocent trader. No cash paid out for VAT = no opportunity for MT fraud. It is simple and will be 100% effective against MT fraud in the goods specified. It will not matter that there are an infinite number of steps in a circular chain, since VAT will only be paid by the final retailer. Other countries are not affected by this measure, since this would not affect dispatches of goods to other EU countries. Recipients of such goods already account for acquisition VAT by a similar mechanism, so they are at no greater risk of being a victim. Other EU member states will only be affected if the fraudsters moved country from the UK. We should support this plan, since the successful implementation should allow HMRC to withdraw the joint and several liability rules which are blighting genuine businesses in the affected areas.