Delays with VAT registration

HM Revenue & Customs (HMRC) is struggling to cope with the new applications for VAT registration.

In a note on its website, HMRC said: "There are delays with the processing of both online and paper VAT registration applications. We are taking steps to improve this situation but please try to avoid contacting us to see how your application is progressing as this may further extend processing times."

The number of new businesses being formed has increased significantly in the past few months as small businesses changed their operating practices from composites or managed service providers to form their own businesses due to the new Managed Service Companies (MSC) regulations.

Some UKTECH readers have recently reported that HMRC is now requiring evidence of trading, such as sight of contracts or third party endorsement.

Barry Hincks, VAT expert at Qdos Consulting said: "Currently because of Carousel fraud, the registration process has become much more rigorous. This applies to every new business not just IT consultants. Unfortunately part of this general tightening up does include asking for copy contracts, which if not provided might mean a refusal by HMRC to allow registration.

"At the moment I have no evidence to suggest that documentation obtained in the registration process is being used for IR35 purposes but this is not to say it might be at some point in the future."