The Federation of Technological Industries has reported an article by Paul Lashmar in the Independent on Sunday. Unfortunately the IoS charges an absurd £1 an article for on line news, but Paul sent it to me direct, so I've had a chance to read it.
The claim is this:
Mobile phone traders have accused Revenue & Customs of launching a hard-hitting VAT crackdown that is driving legitimate companies out of business. Up to 1,000 traders in the mobile phone and computer-chip industries have been told individually that their VAT repayments are under "extended review". Normally, repayments are made within 30 days of a claim, but Customs is currently withholding refunds for three months or more.
The result, it is claimed is that:
"This is causing huge cash- flow problems for our members," said Anthony Elliot-Square, chairman of industry body the Federation of Technological Industries. Earlier this month, the FTI held an emergency meeting attended by around 400 members. "Traders are now owed millions of pounds in VAT repayments," said Mr Elliot-Square. "It is making it impossible to trade. Some will go bust."
Well, tough luck, is my opinion. There are several reasons:
- As the Guardian has noted (and I know the depth of their research) carousel VAT fraud involving mobile phones and chips might cost £10 billion this year. Some cash flow delay for those in the business might be worthwhile to stop that;
- Does this trade need 1,000 dealers? Note, these people aren't making anything - they're traders. I'm sorry - but I suggest that whatever value they might supposedly add by providing a competitive market place is more than lost by £10 billion of tax fraud - so this is a market sector we could largely do without
- If they are traders and they are owed refunds then they're buying in the UK for export - but e don't make much of this stuff (as far as I know). Some maybe, but so much that there are 1,000 people regularly exporting? I doubt that somehow. More like some of them are inflating declared exports, as all the evidence suggests;
- I think the government has the right to withhold any VAT repayment until they can be sure beyond doubt that it is due. If that happens in this business (and everyone must know it is likely know) that's a cost of business. If you don't have the capital to sustain your activity given that fact, then quit the trade.
Tough action is needed on this fraud - and in this case, with specific concern appropriate and the knowledge that many VAT reclaims are fraudulent HMRC is justified in assuming innocence is required to be proven.
I have no time for those who argue otherwise.