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Government faces small business anger over VAT delays

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Last week, the Chairman of the Public Affairs Committee, Edward Leigh MP, slammed HMRC for "badgering" small business people and making the tax registration process complicated and dis-jointed.

We've now learnt that small business VAT registration delays have reached new levels. Firms in Northern Ireland are having to wait as long as 54 days to receive a VAT registration number according to the FSB.

Things may actually be much worse for some applicants. In July, we reported that a typical business may wait 3 to 4 months before being registered for VAT. At the time, Simon Newark, VAT Partner at UHY Hacker Young told Bytestart that the registration process, which used to cost just a few hundred pounds per business, now frequently costs between £1,000 and £2,000 in time costs simply because of the delays.

Self-imposed government targets dictate that firms should not have to wait more than 14 days to become VAT-registered with HM Revenue & Customs (HMRC). But government figures show that in April only 7 per cent of applications met the target, while just 17 per cent were processed by the end of the 14-day window during June.

Firms in Northern Ireland are having to wait as long as 54 days to receive a VAT registration number

Britain's most efficient office in Wolverhampton still takes 32 days to process applications.

A spokesman for HMRC told the FSB, "With increased incidents of carousel fraud [a type of VAT crime], the number of checks that have to be performed has increased. We saw a spike in applications because of Budget changes to so-called managed service companies, while there have been a number of efficiency savings cutting the processing offices from four to two. It hasn't reduced overall staff levels, but some people have had to be retrained."

Posted November 1, 2007

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