Under proposed legislation, companies will be fined if they trade with companies that commit VAT fraud, even where they know nothing about it.
How the hell is that fair, or right?
UHY says the penalties (of up to 30% of the VAT due) will also apply to companies that don’t trade directly with fraudulent businesses but happen to be in the same supply chain.
Simon Newark, head of UHY’s VAT group is quoted by economia:
“HMRC risks turning legitimate businesses that get unwittingly caught up in VAT fraud into collateral damage in its war on fraud.To repeat, how the hell is this fair or right?
Fining businesses that had the bad luck to be unknowingly involved in a supply chain with a fraudster wouldn’t be a proportionate punishment, particularly if normal due diligence checks were carried out, and ‘naming and shaming’ them would risk unfairly turning them into pariahs.
How many businesses can guarantee that VAT has been paid correctly at every stage in a supply chain, when success in business frequently depends on not disclosing your suppliers or customers?
There is a real risk that HMRC could slip into using a ‘shoot first, ask questions later’ approach.”
Tax does have to be taxing.
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It is not fair. It is not right. Simply as.
ReplyDeleteAll legitimate businesses would want HMRC to come down hard on the fraudsters but this is not the way to do it. Businesses should already do due diligence and basic checks but to be punished for unknowingly being in the supply chain, and without knowing more of how the proposals would work in practice, risks harming the business climate.
An organisation like HMRC that has problems with basic 'customer' service cannot be trusted with such a disproportionate power.
What a can of worms.
ReplyDeleteHow then would an organisation or business which paid money, albeit unknowingly, to a company undertaking VAT fraud be treated, especially if they had undertaken due diligence checking against e.g. Co House, public records of criminal fraud, fiscal risk etc., or whether even if the company existed and traded?
You wouldn't pay out millions of what is effectively a third parties money on a wing and a prayer, would you?
Errr....? ROFL
Don't HMRC provide a VAT reg. no. checking service?
DeleteThe VAT reg no. checking service is a basic check all VAT traders should carry out. It provides a degree of assurance but does not guarantee there is no fraud in the supply chain. On the surface the proposal seems heavy handed and difficult to comply with.
DeleteWhether these are criminal penalties or civil , if HMRC cannot prove knowledge or collusion then the courts will kick it in to the long grass asap
ReplyDeleteWhat we have here is a proposed piece of legislation which is excessive and impossible to comply with because a trader can do no more than reasonable due diligence checking. HMRC as a regulator do not have a good reputation and lack integrity. The key words "...even if they know nothing about it" is the concerning part, if they were to take that out then it could be a positive way forward in tackling the fraud.
ReplyDeleteMay I also suggest that if HMRC sorted itself out with their own not insignificant internal problems - bullying, lack of training, lack of expertise, lack of discipline (e.g. law breaking), lack of strategy, outdated 'initiatives' (e.g. pacesetter) which change like the weather and shockingly poor leadership & day-to-day management to pick on just a few issues, then HMRC could become organisation relentlessly focussed (by their actions rather than their words) on pursuing fraud, evasion and avoidance. They're long way off effectively delivering 'core business' (quality real work) currently.
Pacesetter is dead. Long live whatever pathetic replacement they come up with now?
ReplyDelete