Concerns raised over VAT investigations

Experts at PKF believed the new approach would mean added expense for taxpayers while PwC warned that Customs could use the initiative to make speculative investigations.

The new Customs’ procedures, announced last week, aim to replace formal investigations with an invitation to traders to themselves disclose the full extent of their unpaid VAT in return for a reduced penalty worth only 20% of the arrears.

VAT expert Phil Jeffery at PKF warned: ‘An underlying theme of the new approach is that the taxpayer’s adviser does the investigation for Customs, which will presumably free up time for the tax man to conduct more investigations.

‘This might prove to be a more cost efficient use of government resources but it will be the taxpayer who ends up picking up the bill for the investigation.’

Although welcoming the initiative, PwC expressed concerns over control of the procedure. Chris Isaacs, PwC’s director of tax investigations, questioned what control would be exercised over the Customs officers to ensure there were legitimate grounds for investigation. He said: ‘There should be transparency to ensure that there is no scope for “fishing expeditions” by Customs.’

Both Jeffery and Isaacs believed that the new procedure would result in an increase in the number of investigations.

Customs plans VAT evasion shake-up