Well, last Friday it was reported that HMRC had received the go-ahead from the EU to bring in a significant change to the VAT rules to combat carousel fraud. Carousel fraud is where goods are continually imported and exported from the UK to generate VAT refunds for inter-trading companies who then disappear.
The Government report believes that this is costing the taxpayer £1.9 billion each year. An independent European report estimated that the cost to the UK could be as much as £18 billion! (That equates to around 3p on the basic rate of tax).
For the accounting software industry, there is a significant challenge in changing the software to meet the new VAT rules, which HMRC are bringing into effect from 1st December this year.
Two major software vendors estimated between 7 – 18 months to implement the new changes in their software. I guess that Access is fortunate in that our size means that we can be more responsive to such demands. The new rules bring in a reverse charge for certain small high-value goods. If you are buying these specific high value goods you will be responsible for both claiming back the input tax and paying the output tax on the purchase. If you are selling such goods in a business to business environment then you will not collect the VAT on the sale but will need to detail the tax for the purchaser to pay. The change will mean that the treasury will not be exposed to the carousel fraud – but the complexity of our UK VAT regime will grow considerably.
UPDATE 31/10/06: Since writing this blog we have issued a press release on the forthcoming launch of our reverse charge VAT functionality.
Kevin Misselbrook
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