Whilst HMRC take an understandably aggressive stance towards businesses that fail to register and account for VAT by the due date, they can be frustratingly slow to process registrations made on a voluntary basis, leading to cash flow issues for the business that intended to register in order to recover VAT on set up costs.
There is a logic behind this on HMRC’s part as a number of high value input VAT fraud cases have been heard at Tribunal in the last few years with HMRC often being successful in arguing that no real supplies had been made to justify input tax recovery. However, the problem for genuine businesses that have a long lead time between set up and making supplies (such as property developers, product designers etc) or businesses that will always be in a VAT repayment position due to the place of their supplies is that this can result in a real issue.
The Association of Taxation Technicians (ATT) has raised concerns with HMRC regarding this problem and been advised that HMRC’s risk parameters automatically flagged businesses for rejection where there is no turnover shown on the application in the the following 12 months. In such circumstances they advise that a case be made to the registration unit to support the application being processed.
If you or your clients require assistance with obtaining VAT registration or dealing with HMRC when an application has been rejected please call our VAT helpline for an initial discussion so we can assess if you need further support.
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