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VAT amnesty: what they don't say

8th Jul 2011
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HMRC this week officially launched its campaign to target the 40,000 businesses it believes are earning above the £73,000 threshold, but are not registered for VAT.

As AccountingWEB reported in June the latest amnesty initiative is designed to encourage non-payers to disclose what is owed before more severe action is taken against those who refuse to come forward.

If offenders make a full disclosure, most will face a 10% penalty rate on VAT paid late - characterized by PKF partner John Cassidy as a “carrot and stick” approach.

But Cassidy also warned that HMRC was not communicating the conditions of the amnesty clearly enough. “it is asking those who come forward to disclose any other tax arrears at the same time without knowing how much it will cost them,” he said.

HMRC is reserving the right to charge more if a business “knew [it] should have registered, but decided not to come forward”. It also does not say what penalties it will charge on other tax arrears that may have to be disclosed by those taking advantage of the VAT amnesty, he added.

The only guidance available indicates that these penalty rates “will be lower than the customary penalty of up to 100% charged to those who fall outside the opportunity”.

After 30 September, HMRC will investigate those who have failed to come forward. Substantial penalties or even criminal prosecution could follow.

“This is our third campaign, raising more than £500m from voluntary disclosures and a further £100m so far from follow-up activity," said HMRC director of risk and intelligence Mike Wells.

PKF’s John Cassidy advised, “Anyone who owes VAT or other taxes on undeclared business income should own up now before HMRC catches up with them. But if you do need to put things right, you will certainly need to take advice from an expert on how much it is going to cost you.”

HMRC is also believed to be trying to weed out “under the radar” registrations - some of which date back as far as early 1970s - that do not generate sufficient revenue to be worth bothering about.

More information

HMRC website
AccountingWEB coverage

Replies (2)

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By Malcolm McFarlin
11th Jul 2011 16:28

HMRC Staffing issues

I think HMRC may not have the resources to deal with this issue.  A HMRC VAT inspector I spoke to recently expressed concern that they did not have sufficient staff to deal with this latest Government initiative.  Perhaps HMRC are expecting just their publicity campain to bring businesses into line.

Malcolm McFarlin

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By Andrew Robinson
22nd Nov 2011 17:56

Non registration for VAT

They seem to be starting now. Small business exceeded limit by £600 for 4 months in 2008 now under investigation requiring details for 4 years.

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