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The Government has confirmed that businesses applying to register for VAT may experience delays for some time to come.

HMRC have been set a target of processing 70 per cent of applications within a 14-day period by January 2008. However, the minister responsible for resolving the long-standing problem of the slowness with which registrations are being dealt has admitted that  HMRC is unlikely to achieve that target. During October, only 20 per cent  of applications were processed within two weeks.

HMRC receive over 285,000 VAT registration applications each year and have a target of clearing complete and low-risk applications in 14 days, but unfortunately it is currently taking longer than this in most cases. There appear to be several factors influencing current delays. Firstly, VAT registration is the entry point to Missing Trader Intra-Community (MTIC) and other serious fraud. Obviously HMRC must take steps to prevent such abuse of the VAT system and that includes pre-registration checks, which last year weeded out over 7,000 applications. There is more for HMRC to do to target risk checks effectively and so reduce the number of queries needing to be referred back to applicants before their applications can be processed. Alongside that, HMRC are consolidating VAT registration work into two sites at Wolverhampton and Grimsby. There has been a significant increase in the number of applications over recent months following the Budget 2007 announcements on Managed Service Companies, and finally, HMRC have been experiencing some IT issues which have yet to be resolved.

Jayne Kennedy, the financial secretary for the Treasury tasked with resolving registration problems, has admitted that HMRC will probably not succeed in hitting the 14-day processing deadline. She said “HMRC is working towards the target. However, it will be a challenge for them given the constraints they face.”

It has been a long-standing issue. In the year to April 2007, there were 851 complaints about delays in handling registrations, up from 401 in the previous year. In the last six months alone, a further 829 complaints have been received.

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HMRC: VAT registration