Government faces small business anger over VAT delays

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.

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."