Tax & Accounting News

Revived Firms Face Big VAT Bill

10/11/2009

Collapsed businesses that have been rescued via a ‘pre-pack’ administration could be hit by VAT bills of up to £100,000, after HM Revenue and Customs (HMRC) acted to revive a little-known law.

According to The Times newspaper, HMRC is now often demanding a ‘penalty fee’ or ‘security for future VAT’ from those restarting businesses.

The amount HMRC demands is based on the company’s own declaration of estimated future revenue.

The move was criticised by the Federation of Small Businesses, as threatening enterprise and going against the government’s stated aim of encouraging stricken companies to get back on their feet.

HMRC said the move was designed to ‘protect risk to future revenue to the Exchequer and encourage compliance’ but added that taxpayers could ask them to reconsider a decision.