Tony McClenaghan, head of indirect tax at Deloitte, which carried out the research said: ‘Customs is likely to look for early examples of businesses failing to make disclosures to show their vigilance in cracking down on avoidance schemes. Aside from the financial penalties involved, there is a clear threat of reputational damage to businesses not complying with the legislation.’
Of the ‘hallmark’ schemes McClenaghan added: ‘These are very broadly defined in the legislation, and businesses are having difficulty in determining what has to be disclosed to Customs. Where commercial schemes may have been used by companies for many years without challenge from Customs, businesses now have to revisit the motives behind their original implementation.’
A fine of 15% of the tax advantage on listed schemes will be incurred for non-compliance with the disclosure rules, while non-disclosure of hallmark schemes incur a £5,000 penalty.
‘Many businesses are unprepared for the first disclosure dates,’ said McClenaghan. ‘Those who are able to prove they are at least in the process of assessing their VAT planning in order to determine whether it is likely to fall foul of the new rules will be better positioned to protect themselves from financial penalties and reputational damage in the future.’
VAT disclosure rules introduced in August require businesses using VAT planning schemes to report details to Customs within 30 days of the due date of the first VAT return affected by the scheme.
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