New businesses are having to wait for up to five months to receive their VAT registration from HMRC, regardless of them stating that it completes 70% of applications within just two weeks.

One such business owner told Financial Mail that he registered his company for VAT in April of this year and had received a reply from the Revenue advising him that there was a slight delay and it would take 6 weeks to process.

Despite chasing up the application on numerous occasions, he did not receive his registration until last weeks – almost 5 months later.

Kevin Kinsella of Kinsella Tax Investigations says that it could actually leave clients waiting for 3-5 months and could cause a great deal of aggravation later on, if HMRC decide to investigate a client and find that they have traded without charging value added tax for certain periods although they were over the value added tax boundaries.

Apparently it can take between 3-5 months to get that VAT number and it appears the backlog at HMRC has never been worse.

HMRC still deny there is a problem but, again Kevin Kinsella of Kinsella Tax Investigations says it may exacerbate problems for the future especially if HMRC decide to carry out a VAT investigation on firms.

It used to be satisfactory to issue a VAT invoice with the words ‘VAT applied for’ but that is not really a VAT invoice and again could cause problems if there was an investigation by HMRC.

HMRC actually say it takes about 2 weeks to process a VAT application although Kevin Kinsella of Kinsella Tax Investigations knows of cases where they have gone on considerably longer, especially where HMRC think there is a fraudulent application which has happened quite frequently in recent years.

Accountant UHY Hacker Young says that clients are left waiting for between 3 and 5 months.

They warn that if firms have to wait for VAT registration numbers, it can harshly restrict their ability to trade. For example, businesses may not be able to get invoices paid whilst property deals may crumble due to the fact that buyers must be VAT registered for particular types of transactions.

A source from UHY Hacker Young said:

“The backlog at Revenue and Customs has never been worse, despite assurances over the past few years that the issue was being resolved. These delays are causing serious problems for small business trying to set up in a tough environment and are hampering wider economic recovery.”

A spokesman for HMRC denied there were extensive problems, still stating that it, on average, takes just two weeks to process a VAT application.

However, he did admit that HMRC was taking an observant approach to applications in the light of an increased number of fraudulent applications in recent years.

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