Carousel fraud deadline looms for programmers

Carousel fraud deadline looms for programmers

Software developers run out of time to update applications to handle the reverse charge VAT regime introduced by the taxman to fight carousel fraud

In September HM Revenue & Customs obtained approval from the European
Commission to change the way it charged VAT on certain products, such as
microchips and mobile phones, to help it crack down on carousel fraud.

The changes come into effect on 1 December and will require the buyer rather
than the seller of the classified goods to account for VAT.

However, industry experts fear that it will take much longer than this for
software companies to incorporate the alterations to the VAT regime into their
products.

Dennis Keeling, chief executive of the Business Applications Software
Developers Association
(BASDA), was not optimistic
about the chances of the IT industry meeting the December deadline.

‘It may be a further six months before the software industry is able to
deliver updates to its products,’ said Keeling.

Reverse VAT will apply only to business-to-business (B2B) deals and will not
affect ordinary retail transactions. However, trading companies will have to
compile a reverse charge sales list of B2B deals for HMRC on a monthly basis.

The reverse charge capability has been built into software systems, but only
for imports into the EU. The struggle for developers will be to build the
function into software handling local transactions.

‘We would have to upgrade our VAT systems as well as provide the ability to
send the new reverse charge sales list,’ said Keeling.

The urgent need to stem the losses from carousel fraud, which costs the
Treasury as much as £8bn a year according to estimates, means that HMRC cannot
afford to delay its implementation of the reverse charge regime.

Alan Wright, director of online accounts service provider Liberty Accounts,
pointed out that the reverse charge would affect only a small number of
businesses.

‘You have to keep in mind that the reverse charge applies only to a small
number of goods, and only when those goods are sold in bulk; so not that many
people will be affected,’ said Wright.

Keeling pointed out, however, that developers also had to incorporate online
filing charges along with reverse charging functionality.

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