HMRC wants VAT change

HM Revenue and Customs (HMRC) has continued its fight against VAT fraud by applying to the European Commission (EC) for powers to change the tax collection process on selected IT goods.

The government has submitted an application to the EC for a ‘derogation from the provisions’ (or ‘reverse charge’) of the EC Sixth VAT Directive. This would mean suppliers of goods such as components, mobile phones and chips no longer need to account for VAT on their sales. Instead the responsibility is passed on to the purchaser of the goods.

HMRC’s move is a result of the European Court of Justice (ECJ) ruling last month in favour of components wholesaler Bond House Systems, which appealed to the ECJ after it had a multi-million-pound VAT rebate withheld because it became unwittingly involved in carousel fraud.

Paymaster General Dawn Primarolo MP, said: “The reverse charge is an important tool in tackling this fraud as it removes the opportunity for criminals to steal VAT.”

Ian Prescott, former managing director of Bond House Systems, said: “This is going to put a lot of pressure on legitimate traders and creates a new opportunity for fraud because firms can purchase goods VAT-free and then sell them in countries where there are no VAT restrictions.”

Eddie Pacey, director of credit at Bell Microproducts, added: “I don’t think HMRC will ever beat the fraudsters.”

sara_yirrell@vnu.co.uk