Sunday, 28 December 2014

Company transparency – disclosure of VAT information by HMRC

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.  The Bill is currently undergoing readings before the House of Lords following the 1st reading on 19 November 2014 and the 2nd reading on 2 December 2014.

Our last blog referred to the power provided to the Treasury to make regulations authorising the disclosure by banks of credit information on small to medium-sized companies. Section 6 of the Bill provides that, from commencement, HMRC will be able to disclose any information on its VAT file to any person seeking such information to assess creditworthiness, regulatory compliance or risk of fraud.

The category of “person” who may seek such information is very wide and can range from the police and regulatory bodies, to banks, suppliers or customers.  Companies which have entered or are undergoing Time-to-Pay Agreements or which have any issue or late payment of VAT are therefore under an immediate threat that this could lead to higher finance costs as a result of the denial of credit by suppliers (thus threatening the ability of some companies to trade).

This again supports the need pervasive throughout the Bill to ensure company transparency and assist third parties dealing with companies to properly understand their financial position before committing to any agreements. In line with this, the Bill also provides that HMRC may disclose prescribed information (subject to the introduction of necessary regulations to define the information disclosed) relating to the type of goods exported from the UK and the identity of the exporting individual.  This is designed to combat the proliferation of fraud, as well as supporting the theme of transparency.
Accordingly, as this applies to all companies, it is essential that tax affairs are addressed immediately and well before the Bill becomes legislation. Ongoing Time-to-Pay Agreements and arrears of tax could suddenly be determinative as to whether your company can continue to trade with inquisitive suppliers.  
At Francis Wilks & Jones we can assist with HMRC negotiations and restructuring issues with a view to mitigating the impact of this legislation.