Channel disappointed by delay in Reverse Charge strategy
HMRC decides to postpone the implementation of strategy designed to defeat carousel fraud
The channel has expressed dismay over HM Revenue and Customs’ (HMRC) decision to delay the implementation of its proposed Reverse Charge strategy, which is designed to defeat carousel fraud.
HMRC originally applied to the European Commission (EC) in January to change the way tax is collected on certain goods, including mobile phones and computer chips. The government claimed at the time that the strategy could be implemented by October, provided it received approval by the EC (CRN, 24 July).
However, in a document released by HMRC last week and reported by CRN (CRN Online, 18 September), it was revealed that 1 December is now the earliest date the strategy can be implemented.
HMRC has cited two reasons for the delay. First, the time in which it would take businesses to update their accounting procedures to accommodate the strategy. Second, issues related to the de minus limit, below which Reverse Charge would not apply.
A representative for HMRC told CRN: “The government remains determined to introduce the Reverse Charge at the earliest opportunity. However, implementation in the UK is dependent upon the EC derogation.
“HMRC recognises that not every affected business will be able to introduce changes to IT systems by December 2006. In practice, such businesses will have to adopt some interim arrangements.”
Anthony Elliot-Square, chairman of the Federation of Technological Industries, told CRN: “I’d be amazed if the Reverse Charge is even in place by 1 December. The government has woken up to the problems in the VAT system too late. Until VAT rates between EU [European Union] members can be harmonised, its fundamental problems cannot be overcome.”
Stephen Fenby, financial director at distributor Midwich, told CRN: “We would have to update our systems to accommodate Reverse Charge and I understand that this won’t be an easy task. It could have a range of impacts on the channel.”
Phil Hemmings, director of corporate affairs at VAR Research Machines, said: “This is something that we will need to deal with, but we need good and clear notification so that we can comply with it.”