Q: As a newly-registered VAT business am I risking extended verification/reclaim refusal if I trade with another newly-registered VAT business?
Nov 11 2011
Answered by: Chas Roy-Chowdhury Ask a question
There is no requirement for a business to have a trial period as a VAT-registered entity; neither you nor the business you are dealing with. However you need to be careful when it comes to dealing with other businesses when we are talking about VAT – it is the main tax where significant levels of high value fraud occur and the tax authorities are very aware of this. In order to combat this there is the most draconian Missing Trader Fraud (MTIC) legislation in place.
Very broadly, the VAT legislation in the MTIC area will impact where one or more legs of a transaction chain involves a cross-border transaction and one of the traders in the transaction chain disappears without paying across the VAT they should have to HM Revenue & Customs. HMRC can then go after another party in the transaction chain for the VAT. This other party in the chain may well be totally innocent but it is assumed that they should have known better than to have been involved in a chain transaction, usually involving such things as mobile phone SIM cards or computer chips, which were being sold at a clear under value. Therefore, you need to be careful in the choice of those you are doing business with. Not just from a VAT point of view but also in order to ensure that they pay you for your supplies.
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