New procedures – to be trialled for 12 months in three Customs regions – will replace formal investigations with an invitation to traders to disclose their unpaid VAT in return for a reduced penalty.
At the same time, the #75,000 prosecution threshold – the level at which VAT evaders can expect to be prosecuted through the criminal courts – is to be abolished, allowing more cases to be dealt with using civil procedures.
Tony Walker, head of Customs’ VAT anti-fraud strategy team, said: ‘The changes are aimed at both accountants and traders but in the early days we would expect there to be a positive reaction from the accountancy profession.’
Traders suspected of evasion will be notified by Customs and invited to prepare a full disclosure of the unpaid VAT.
If Customs agrees the disclosure the trader will face a maximum penalty of only 20% of the VAT arrears.
Under the old system, traders could face penalties equal to 100% of their arrears, which could be decreased to a minimum of 25% under mitigating circumstances.
Phil Jeffrey, a VAT advisor at Pannell Kerr Forster, warned that the new approach could free up time for Customs to carry out more investigations.
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