VAT Newsletter December 2003

The Chancellor will present the Pre-Budget speech on Wednesday 10th December 2003.

The above 'penalty' is levied when a VAT return is not paid by the due date and ranges from 2% to 15%.

A recent Tribunal (Greengate Furniture Ltd) raised the issue of whether the default surcharge infringes the principal of proportionality.

The Tribunal reviewed the legislative history of the surcharge and the absence of mitigation.

However, following this review, the Tribunal could not conclude that the default surcharge system as a whole was 'devoid of reasonable foundation' or 'not merely harsh but plainly unfair'.

Because of this, the appeal had to be dismissed.

The lesson to be learnt from this is for businesses to render their VAT returns and payments on time as, apart from the plea of 'reasonable excuse', there is no mitigation whatsoever.

Whilst on the subject of penalties, a recent Tribunal case (Michael Eggleton) looked into mitigation re the above.

Most importantly, the Tribunal reduced the mitigation allowed by Customs from 75% to 50%, effectively increasing the penalty from £2,500 to £5000. Furthermore the Tribunal awarded costs of £1000 to Customs.

In yet another Tribunal case (Mike Kiernan's Beer Tent Company Ltd), the company was represented at the Tribunal by one of its own Directors (Mr Kiernan).

Mr Kiernan submitted a bill for costs to Customs that included nearly £100,000 for his time at £50 per hour. The Tribunal held that a company, acting through its Director, is NOT entitled to claim the cost of the Directors time as if he were a professional advisor.

Costs are therefore restricted to those of professional representation such as can be provided by VATease.

New anti money laundering rules for High Value Dealers, affecting businesses that accept large cash payments have been delayed and are currently undergoing internal Government scrutiny.

As previously reported in an earlier edition of this newsletter, the new rules will apply to businesses that deal in goods and accept in cash the equivalent of 15,000 euros or more for any single transaction (approximately £10,000).

Treasury and Customs will publicise the date when the Regulations are brought in. From that date, businesses are likely to have three months in which to put in place their systems and four months to register with Customs.

If you require further information please contact us on 0121 778 4299.

This newsletter is designed to keep readers abreast of current developments. No liability is accepted for errors, omissions or opinions it contains or for any reliance placed on this newsletter. This newsletter is intended for general guidance only. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or publishers. On any specific matter, reference should be made to the appropriate advisor.

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