Concern over VAT penalty plans

Government plans to crack down on VAT fraud through a new scheme have prompted concerns that basic errors may be punished excessively. The Chartered Institute of Taxation (CIOT) wants to see changes to a scheme designed to curb evasion among firms that store goods on behalf of non-EU firms in the UK for delivery to customers in Britain. 

Such firms will have to register with the Fulfilment House Due Diligence Scheme, which is designed to create a level playing field through ensuring fairness. However, the CIOT is worried that, where an importer is correctly declaring taxes to HMRC, a business operating under the scheme might face an excessive penalty for a small clerical error in recording the number of goods stored, even if they are still paying all taxes due.

Chair of CIOT’s Indirect Taxes Sub-Committee Alan McClintock said: "It is likely to be the ‘little guys’ who make administrative mistakes, as they may not have the administration control and oversight that larger fulfilment houses can rely on." He urged the government to take a "light touch" approach to such errors.