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14 May 2007
More than 1,000 UK channel players – including major distributors and high-end system builders – are in for a shock when HM Revenue and Customs’ (HMRC) fraud-busting Reverse Charge scheme comes into force on 1 June.
At a seminar organised by the Professional Computing Association (PCA) last week to highlight the issues surrounding Reverse Charge – which transfers the onus for VAT onto the purchaser rather than the seller – it was stressed that any firm selling CPUs or mobile phones in orders worth £5,000 and above will be liable. This means they must change their entire accounting software system to be able to accommodate the tax changes.
Keith Warburton, chief executive of the PCA, said: “The biggest impact will be on the vendors and their distributors, but about 1,000 channel firms are going to be affected as well. It is a massive issue for the industry.”
Sukh Rayat, vice-president of Avnet UK, said: “It is going to mean significant changes on our part. HMRC has done a bad job communicating with the companies concerned. It is also an added cost for us to make sure we are fully compliant in time.”
Les Billing, managing director of Microtronica, said: “This is going to completely change the way we report VAT. It has required a massive investment on our part and it would be nice if we were given some sort of tax dispensation by the government. However, I am hopeful that Reverse Charge will make a difference [to VAT fraud].”
Dennis Keeling, chief executive of the Business Application Software Developers Association, which presented at the PCA event, said: “I was surprised at how unprepared the channel is for Reverse Charge. It is the most significant change to the VAT system since 1993.”
HMRC said: “The government is committed to minimising the disruption to genuine traders and HMRC has worked closely with businesses and tax advisers in advance. We have published updates online and held workshops to assist with preparations.”
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