VAT fraud proposals hit EC snag

Components and mobile phone dealers were dealt another blow by the European Commission (EC) last week when it failed to discuss the UK government’s fraud-busting Reverse Charge proposals for the third time in less than six months.

HM Revenue and Customs (HMRC) had hoped to originally implement Reverse Charge – which would levy VAT for chips, components and mobile devices onto the end-user rather than at each stage of the supply chain – in the UK this month, three months after its original October deadline (CRN, 24 July).

However, France threw a spanner in the works by ‘raising more issues’ on the strategy just days before an EC meeting of finance ministers took place to discuss and possibly implement Reverse Charge. The move means the strategy will have to be discussed in February and will not come into force until April at the earliest.

Robert Holland, associate solicitor at law firm Dass Solicitors, which is representing a large number of UK traders, said: “Speculation is mounting that HMRC has a policy not to pay anybody in the industry their VAT repayments until Reverse Charge is in place. This is causing enormous problems because the vast majority of traders are still in limbo and have yet to be paid. This has been going on since March last year.”

However, an HMRC representative said it was very much business as usual and the delay over Reverse Charge was having no effect on day-to-day operations.

“It is true that the UK government has applied to the EC for a [Reverse Charge] derogation and we are currently awaiting a decision on this,” he said. “We are actively checking a greater number of suspect claims. However, as soon as we are satisfied that even part of the claim is valid, we repay it immediately.”

Europe fails to agree on Reverse Charge strategy