Support government proposals to relax VAT rules, industry uged

Hospitality operators have been urged to back Government proposals to relax the rules on VAT payment errors.

Under current regulations, if businesses make an error of under £2,000 in VAT returns, they can wait until their next return to correct the mistake. However, anything over £2,000 must be reported to HMRC immediately. 

This can be very costly for businesses, as a "full and frank" disclosure must be made, including an analysis of why the error occurred in the first place.

HMRC is now considering raising this disclosure limit, possibly with different limits applied to small, medium and large businesses.

Keith Hobson, solicitor in the VAT and Customs team at law firm Halliwells, said: “This will come as a relief to businesses in the hospitality sector, where frequent, complex trading means that genuine errors are more likely to occur.” 

“HMRC’s consultation on the topic is open until 31 October, so businesses that wish to show their support for any changes should do so before this date,” he said.

HMRC has also recently announced a new penalty regime, anticipated to come into force after the 1 April 2009. 

Even careless inaccuracies will attract a penalty, although this can be reduced to zero if the business makes an unprompted disclosure. 

Hobson said: “The message is clear: whilst HMRC is prepared to listen and respond to businesses’ needs, it will come down hard on those who do not disclose any inaccuracies they have made.”

The consultation document is available for download here >>

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By Daniel Thomas

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