HMRC Launches VAT Initiative

THE TAXMAN will be sending more than 40,000 letters out over the next few weeks informing businesses how to register for VAT.

HM Revenue & Customs is focusing on businesses that have a turnover of £73,000 and above but are not VAT registered. The letters will tell businesses that those that have not registered will face a "low penalty rate" of 10% on unpaid VAT if they register by 30 September.

The businesses contacted will also be invited to disclose other unpaid tax and face penalties lower than the standard charge of 100% they would have to pay if they were caught by HMRC.

Mike Wells, HMRC's director of risk and intelligence, said: "The aim is to make it easy for individuals and businesses to contact us, make a full disclosure of their income and face a reduced penalty on any tax owed.

"I urge people who have not registered their businesses for VAT to get in touch with HMRC and get their tax affairs in order simply and on the best available terms."

Chas Roy-Chowdhury, head of tax at ACCA, said it was vital that HMRC is not too heavy-handed in dealing with small businesses.

He remarked: "Many businesses might believe they do not qualify for VAT registration because they make small profits despite a turnover of more than £73,000, which is the threshold for registration.

"This is one area where the trader needs to be educated and HMRC needs to be careful. It must not get too heavy handed and put businesses out of work."

HMRC should instead let businesses know about Time to Pay arrangements to get their tax affairs in order, he added.