Channel players have condemned plans by HM Revenue and Customs (HMRC) to implement its controversial ‘Reverse Charge’ strategy in the UK by October if it is approved by the European Commission (EC).
In January, HMRC applied to the EC for powers to change the way tax was collected in certain sectors of the IT industry, including mobile phones, chips and processors, which are most susceptible to missing trader or carousel fraud (CRN, 6 February). Known as Reverse Charge, the strategy means the purchaser of the goods, rather than the seller, is liable for VAT. Last week, HMRC announced that Reverse Charge could become law in the UK as early as October, provided it is approved by the EC.
According to government figures, the UK’s annual VAT losses through carousel fraud stands at between £1.1bn and £1.9bn. An HMRC representative told CRN: “This measure is targeted on those goods used in the majority of missing trader intra-community fraud cases.
“We recognise that this is a significant change in the treatment of VAT on the goods and we will work closely with business and tax advisers to minimise any cost and disruption to genuine businesses.”
However, Fritz Johnson, financial director at storage distributor Hammer, slammed the proposal.
“This shows a complete lack of understanding in implementation time required,” he said. “The bureaucracy this would create for the channel would be immense.”
Phil Hemmings, director of corporate affairs at reseller Research Machines, told CRN: “Any new taxation system that is brought in over a relatively short timeframe will cause problems.”
Andy Cordial, director of storage manufacturer and distributor Origin Storage Solutions, said: “An October deadline would be very tight. It would need at least six months.”
Anthony Elliot-Square, chairman of the Federation of Technological Industries, told CRN: “As an anti-fraud measure this sounds strong, but the devil will be in the detail.
“Any measure to tackle fraudsters is good, so long as it doesn’t hurt innocent traders.”
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