8 April 2008
We received a petition asking:
"We the undersigned petition the Prime Minister to Wrongly Withheld Input Tax on UK Businesses by HM Revenue and Customs."
Details of Petition:
"Currently HM Revenue and Customs have and are withhold Input Tax repayments on UK business for alomst 1 year and intentionally driving UK businesses into voluntary liquidation."
Read the Government’s response
Faced with an organized attack on the VAT system, the Government took appropriate action to protect the revenue. Our response has been proportionate, targeted and risk-based, focusing on trading activity linked to fraud. This has included the verification of repayment claims submitted by a very small minority of VAT registered traders, whose activity is suspected of being linked to Missing Trader Intra Community VAT fraud.
To date, in over 95% of cases where VAT returns are subject to extended verification, HMRC have found that the traders had either been participating in, or profiting from trading activities linked to MTIC fraud and, therefore, their subsequent repayment claim is not properly due, or else there is sufficient suspicion that HMRC has a duty to continue to investigate the claim further. So far, only 1% of the VAT withheld under the extended verification programme has been found to be correctly claimed and properly repayable. These claims have been repaid as soon as HMRC has been satisfied that they were due.
Delays are often caused by the fact that such trading chains are made deliberately complex in order to hamper the verification process. However, as soon HMRC is satisfied that even part of a claim is valid, they repay that part immediately. Whilst the verification is taking place, HMRC will also consider any request from the claimant to release the repayment claim in whole or in part on a ‘without prejudice’ basis. Where the verification is causing genuine financial hardship, HMRC will offer to make an interim payment, which, in most cases, will be subject to the provision of a guarantee (or security) from an approved financial institution.
HMRC has defended their actions in Court on numerous occasions. To date, the courts have found that HMRC’s policy is reasonable and that they are not taking unnecessary time to process the claims.