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Steve Allen, Director of VAT Solutions (UK) Ltd, highlights ongoing VAT compliance difficulties with HM Revene & Customs

Steve Allen

Registration delays

Despite its best intentions to improve matters, HMRC continues to inflict long delays on businesses applying for VAT registration. In the worst cases, some businesses could fold as a result of lost turnover or delayed VAT repayments.

An announcement at the beginning of November from Jayne Kennedy, Financial Secretary to the Treasury, confirmed what most people were already thinking, in that the recently self-imposed target of processing 70% of cases within 14 days by the end of January 2008, is unlikely to be met by HMRC. The processing figures for September 2007 showed that HMRC had only managed to process 20% of cases in 14 days (up a mere 6% on the August figure). There was more than a hint of understatement from Ms Kennedy when stating “HMRC is working towards a target. However, it will be a challenge for them given the constraints they face.”

The VAT registration situation is being brought up regularly in Commons debates, and is of great concern to MPs from all of the main political parties. The number of registration complaints received by HMRC in the year to April 2007 was 851, more than double the 410 figure for the previous 12 months.  In the past six months alone, however, 829 complaints have been received, with many more expected as the delays continue.

Catastrophic effects

A recent article in The Independent newspaper highlighted some of the potentially catastrophic effect of the delays, referring to one business in Stoke-on-Trent, Eurostar Global Electrics, which has been waiting for a VAT number for 9 months and counting.  The company, which trades with companies in Europe, has already lost £480K in turnover (and £34K in profit) due to their customers’ insistence that they be VAT registered. The company, which has had to cancel its expansion plans, is currently in a net VAT repayment position of £110K, and the delay in receiving this refund may well now result in the (otherwise profitable) business going under, according to its Managing Director. The plight of the company is currently being taken up with the Paymaster General by the local MP, Robert Flello.

Restructuring

Unfortunately, there isn’t any good news on this issue, as even the 1 October 2007 restructuring of the VAT Registration Units has hit problems. The plan was for Wolverhampton to be become a national processing unit for all standard applications (with Grimsby handling VAT68, VAT group, Annual Accounting and Flat Rate Scheme applications).  However Wolverhampton cannot now take on all applications until December, so Camarthen and Newry will continue to process cases for their postcodes in the interim.

Online Applications

Not wishing to be outdone by its paper-based rival, HMRC’s online registration function has also got in on the act recently, following news that the usual ability to apply for registration up to three months in advance will be temporarily unavailable until January 2008. Apparently, there is an ‘issue’ with the IT systems which means that an application made in 2007 cannot be processed if it involves a 2008 registration date!

Comment

Logically, things should steadily improve, but with HMRC, you just can’t be sure!