 VAT registration amnesty on the way
25 MAY 2011: PKF Accountants & business advisers has welcomed HMRC’s announcement that it is targeting unregistered sole traders and businesses as another sign that the merged tax department is finally getting its act together.
John Cassidy, tax investigation and dispute resolution partner at PKF, comments, “I understand that HMRC’s new campaign on VAT registration will be driven by simple data analysis. It is identifying individuals and businesses that have returned annual turnover above or very close to the annual VAT registration threshold, currently £73,000, and checking to see if they are VAT registered. This is the sort of basic check one would have expected to have happened even back in the days when the Inland Revenue and Customs and Excise operated independently - I find it amazing that it seems not to have occurred before in a systematic way. At least HMRC is now consulting on the design of the disclosure facility it plans to offer as part of the campaign.”
Billy Cairns, VAT partner at PKF, said, “The penalties and surcharges for failing to register for VAT are so swingeing that anyone who lets things slide for a year or more will be facing a huge bill if they do eventually decide to come clean by registering. So, if HMRC does offer some form of low penalty for voluntary disclosure, like it has with its direct tax disclosure facilities in recent years, it could turn out to be a very good deal. It is not unusual for business owners to decide that they will never return enough turnover to be VAT registered – no matter what level of income they actually achieve in each year in cash terms! So if HMRC really wants this campaign to work, any voluntary disclosure facility it offers must also cover undisclosed income from cash in hand activities that haven’t gone through the books.”
John Cassidy added, “We expect HMRC will have learned from the low take-up of other recent amnesties that it must take a carrot and stick approach: offer low penalties for those who come clean but follow up with detailed investigations into those who don’t. For example, if you have shown turnover just below the VAT registration threshold every year on your income tax return and don’t use any amnesty that is offered, you can expect a compliance visit or business records check from HMRC in the future.”
Ends
For further information, please contact:
Andy Konieczko on 020 7065 0537 or andrew.konieczko@uk.pkf.com
Jane Murray on 020 7065 0135 or jane.murray@uk.pkf.com
Notes to Editors:
1. VAT registration penalties are as follows:
- Where the failure to register was not deliberate, penalties range from 0-30% of the unpaid VAT. Penalties are unlikely to exceed 10% if the liability to register is disclosed to HMRC within 12 months. No penalty is payable if the business can show it had a reasonable excuse for not registering on time.
- Where failure to register was deliberate, penalties can be as high as 100% of the unpaid VAT, although an unprompted disclosure could reduce this considerably, possibly as far as 20%.
2. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk
3. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Guernsey) Limited is incorporated in Guernsey.
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