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Customs crackdown

Small firms should be aware of possible VAT fraud by their suppliers or they may be landed with a large tax bill themselves, according to accountancy firm Grant Thornton.

The warning follows a decision by Customs and Excise to pursue companies for unpaid VAT if they were aware of, or had reasonable grounds to suspect, tax wasn’t paid on goods somewhere in the supply chain.

Although the rules will not come into force until the upcoming Finance Act is passed, the government says it will act retrospectively on any VAT dodging that has taken place since April 10.

Grant Thornton warns small firms to put in place procedures to ensure they could prove to officials they had not turned a blind eye to VAT fraud.

Frank Hartley, VAT partner at Grant Thornton, said any business which bought or sold equipment would need to prepare itself for the “sweeping” new rules.

“If they do not, they run the risk of leaving themselves accountable for the VAT liabilities of other businesses both up and down the supply chain.

“I am very concerned that the discussion already held on this subject has been focussed exclusively on fraud and may have led some businesses into a false sense of security.

“The measure is clearly aimed at the problem of VAT fraud, but unwary businesses may get caught if they are not careful,” he said.

Although the Treasury and Customs and Excise have promised to carry out a consultation on best practice in enforcing the new rules, it is expected firms implicated in VAT fraud will be dealt with harshly.

The government’s tough stance on tax cheats follows similar statements of intent from the Inland Revenue, which has warned tax dodgers they have “nowhere to hide” in the UK, and has promised prosecution for those committing fraud.

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