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Volume 455: debated on Wednesday 24 January 2007

To ask the Chancellor of the Exchequer (1) whether it is HM Revenue and Customs' policy to apply (a) extended verification and (b) other supplementary VAT procedures in respect of (i) certain industrial sectors, (ii) selected companies and (iii) more generally; (117323)

(2) whether his Department has informed traders in the mobile telephone and computer-chip industries when they can expect to receive the VAT repayments that are under extended review;

(3) for what reason his Department has placed VAT repayments for traders in the mobile telephone and computer-chip industries under extended review.

HMRC has a duty to protect tax revenues, including taking steps to counter inaccurate, fraudulent or abusive repayment claims. HMRC is entitled to verify VAT repayment claims to ensure that they are properly payable. Decisions to verify repayment claims or take other action to improve taxpayer compliance are made on the basis of perceived risk and are applied across the whole VAT register.

Given the very complex nature of missing trader intra-community-MTIC-fraud, HM Revenue and Customs needs time to pursue inquiries and consider the consequences of all that they find. As soon as a VAT repayment claim is selected for verification HM Revenue and Customs fully explains the verification process in writing. Updates are also provided on a regular basis throughout the process. Only when inquiries are completed will HM Revenue and Customs advise claimants of the outcome.

Last year the level of VAT repayment claims from those suspected of trading in supply chains associated with MTIC fraud rose very rapidly, without known economic or commercial reason. As a result, HMRC is verifying a greater proportion of VAT repayment claims from businesses dealing in goods, such as mobile phones and computer chips, and with other sectors known to be associated with MTIC fraud. In order to ensure that its action is proportionate, HMRC has deployed an additional 600 staff to enable these verification checks to be carried out efficiently and effectively.