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Steve Allen, Director of VAT Solutions (UK) Ltd, highlights a potentially serious problem for businesses registering for VAT.

Steve Allen

Worsening delays

Delays in VAT registrations continue to get worse, and can now take as long as three or four months for a seemingly straight-forward case.  This compares with two months in 2006, and around two weeks a few years ago. Delays of up to six months are common when anti-fraud checks are carried out as part of the clampdown on carousel fraud. According to recent reports, it is now taking 30 days or more for registrations sent by post to even be opened by HMRC, and correspondence sent to them in support of applications is often lost, further complicating and delaying the process.

Effect on businesses

Businesses waiting for a VAT registration number can face severe restrictions on their capacity to trade. For example, small businesses without a VAT number may not be able to get invoices paid, or property deals can be unduly hampered because the law requires for some types of property deal that the buyer is VAT registered, and sellers are understandably unhappy about proceeding before HMRC have processed the paperwork. The time and cost of getting a business registered is also being adversely affected.  Business advisers are now incurring significant time costs simply because of the delays, some or all of which are having to be passed on to their client businesses

HMRC’s handling of the issue has been less than sympathetic, as demonstrated by the recent posting on their website asking registration applicants not to bother phoning to check the progress of applications, as this may add to delays. Such is the size of the ‘black hole’ at Registration Units that applicants and advisers are forced to constantly check things with HMRC, such as whether the forms and supporting documents have been received, whether the case has been allocated to a caseworker, does the caseworker understands the applicant’s particular circumstances, as well as trying to pre-empt the issue of pointless ‘Request for Information’ letters.

Clearly, the clampdown on carousel fraud is a major cause of the problem, but as carousel fraud is not about to go away, HMRC quickly need to address the long term management and staffing issues if the situation is ever going to improve. To make matters worse, HMRC recently admitted that the situation will continue to worsen due to an additional 20,000 VAT applications received from newly-incorporated businesses as a result of the managed service company legislation in the Finance Bill 2007.  This makes the recent decision to close the Newry and Camarthen Registration Units all the more baffling.

Stop complaining!

There is little point in complaining about the matter. The Complaints Unit is so inundated that it takes a month just to acknowledge a formal complaint, and even then, is unable to give any indication of when the complaint will be dealt with.  Apparently, HMRC’s official policy is now that VAT registration delays are no longer a complainable matter, since all taxpayers are being equally disadvantaged, and no-one can say they are being unfairly treated!