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VAT CRACKDOWN

HM Revenue & Customs have announced an initiative to crack down on VAT rule breakers. The new campaign will focus on individuals and businesses who are trading above the VAT threshold (from 1 April 2012 = £77,000 in any consecutive 12 month period) but who have not yet registered for VAT.

The initiative is being discussed with interested parties to ensure HMRC has as much information from them as possible before launching the campaign later in the summer.  Mike Wells, HMRC's Director of Risk and Intelligence, is quoted to have said:

“Our aim is to get as much input as possible into our future campaigns so that the views and experience of people and organisations outside the department play a fuller part in what we design for customers.

“We are already in contact with a number of interested parties and I expect many more to contact us with their views before we finalise the design of the VAT initiative.

“This will be the model for all our future campaigns and we look forward to being even more open about the compliance activity HMRC is undertaking to ensure we reduce the tax gap and help customers pay what they owe.”

Each HMRC campaign is aimed at reducing the tax gap by focusing on areas where a significant underpayment has been identified. The department provides opportunities for tax-payers to put their records in order on the best possible terms, followed immediately by activity focused on the non-compliant who choose not to take up the opportunity. HMRC has raised over £500m from voluntary disclosures and a further £100m so far from follow-up activity.

Previous campaigns have targeted offshore investments, medical professionals and people working in the plumbing industry. For each, HMRC claims to have used new technology and legislation to gather and analyse data, from internal and external sources, to identify people who should come forward. Those who don't come forward are then pursued, with serious consequences.

More details:

Penalties for undeclared VAT can be as much as 100% of the tax, especially where HMRC make the first move (ie if they contact you before you contact them).  The purpose of this initiative is to get as many people as they can to come forward, if they are over the VAT threshold, but have not registered - anyone who does not, but who is later found to be in breach of the law, will get much harsher treatment.

Full details of the scheme are due to be released later in the summer.

If you think that you might need to be VAT registered, or have any other related queries, call Chris Havard in our Gosport office (023 9234 0770) or Sue Jones in Cowplain (023 9234 0775) to discuss further.

HMRC have published a list of vehicles that might be vans or might be cars for VAT purposes. 

Note that the VAT treatment is very different for cars and vans.  You cannot reclaim the VAT paid on a new car, but (if you are VAT registered) you can on a van. A list of vehicles that might be one or the other is available here.

For taxable benefit purposes (employees and directors):

For PAYE benefit purposes it can be different again, depending on any modifications made to the vehicle.  Unless it is obviously The key test is whether the vehicle is:

'..primarily suited for the conveyance of goods or burden (note that ‘primarily’ is crucial and that ‘goods or burden’ does not include people).'

All vehicles that have any private use are regarded as cars unless they are covered by this exception. HMRC detailed guidance goes on to say:

If a vehicle has side windows behind the driver and passenger doors, it is also unlikely to fall within this exception. This is particularly so if it is fitted, or is capable of being fitted, with additional seating behind the row which includes the driver. This remains true whether or not those additional seats are in the vehicle at the time.

Many vans on the market today have small windows behind the driver / passenger seats and these will fall foul of this rule. 

If you are in any doubt about whether your vehicle, or a proposed purchase, is a car or a van, get in touch with us - see home page for contact details. 

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