TaxAdministrationChannel businesses face VAT threat

Channel businesses face VAT threat

Channel players could unwittingly become liable in VAT fraud cases, after new legislation came into effect recently.

Link: Companies forced to police VAT scams

According to industry watchers, the law, which applies to the mobile phone and IT industries, means businesses that become unknowingly involved in VAT fraud can now be held liable.

‘These changes are seriously big time. Channel businesses need to be vigilant and ask questions about who is buying,’ said Nitin Joshi, partner at PKF.

‘Joint and several liability means suppliers who have sold as an innocent party and have become unwittingly involved in a wider fraud may become equally liable. Often, the perpetrators have liquidated their companies leaving innocent firms behind to face the music.’

Matthew Johnson, a barrister at DLA, said firms need to be suspicious of cheap goods. ‘The worrying element is that there is no cast-iron solution,’ he said. ‘Firms can minimise the risk, but they can’t eliminate it.’

Steve Hallworth, a Customs representative, said Customs had put 400 extra staff into looking at VAT fraud. ‘VAT fraud cost the government £2.75bn last year,’ he said. ‘We have introduced a nationally co-ordinated strategy to halve this by 2003/4. This is a top priority for us.’

Hallworth said there were safeguards built into the law where firms had taken ‘reasonable steps’ to check their supply chain. He added that Customs will soon be issuing a statement advising firms on how to protect themselves.Eddie Pacey, director of credit at Bell Microproducts Europe, warned: ‘Some firms will try to ride this and hope they don’t get tangled, which isn’t very wise.’Duncan Wyeth, director at VAR Serion Logic, said the law would be a good thing for the channel. ‘This will weed out the sharks,’ he said. ‘People should buy from legitimate sources. The government is trying to help IT become less fraudulent.’

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