HMRC’s ‘light touch’ re New Year VAT rate errors
HMRC have published the guidance given to their staff who will be checking that VAT registered traders take proper account of the change in VAT rate from 15% to 17.5% on 1 January 2010.
HMRC intend to operate a ‘light touch’ as regards errors identified in the first VAT return after the change where the error relates to a change of rate issue.
This means that HMRC will not target change of rate errors that are unlikely to lead to any material net revenue loss. And if they find errors which relate to a change of rate issue they will not seek an adjustment unless they have reason to suppose that there is an overall revenue loss.
The ‘light touch’ will therefore be of little value to VAT registered traders who supply standard rated goods and services to the public or to any other customer who is not able to recover VAT in full.
In situations where HMRC do insist on adjustments (and issue an assessment) they will take into account the difficulties the business has faced in adjusting to the change in considering whether penalties apply.