MP hits out at new VAT red tape that will 'add to small firms' burden'

THE deputy leader of the Scottish Liberal Democrats has spoken out against European Union tax rules that he says will put hefty burdens on small businesses.

Michael Moore, MP for Berwickshire, Roxburgh and Selkirk, lambasted new VAT regulations that came into force on 1 January requiring firms to submit quarterly sales lists on services. In the past only companies supplying goods had to submit quarterly reports.

Moore has written to HM Revenue & Customs to express his concern over the new rules. He argued that the potentially crippling 15 a day penalties for late delivery of figures will be particularly damaging for small companies in his Borders constituency.

He said: "After a year in which many small businesses struggled to survive as a consequence of the economic downturn, it is clear that this new legislation will increase the regulatory burden at a time when a number of hard-pressed small companies in the Borders are crying out for support from the government. Action needs to be taken to ensure that those companies likely to be affected are aware of this change."

The Federation of Small Businesses and CBI Scotland said it agreed with Moore's complaints.

Colin Borland, the FSB public affairs manager for Scotland, said: "Small firms are working hard to trade Scotland out of recession and back to growth, but landing yet more paperwork on their desks is going to make that task even harder. The FSB has urged the UK government to look at these regulations to ensure we're not gold-plating the European requirements," he said.

CBI Scotland's assistant director, David Lonsdale, agreed, saying: "Red tape is a real bugbear for firms and one of the most significant avoidable constraints on business growth. We share the concern that these new EU-wide VAT rules are likely to create a disproportionate administrative burden without necessarily being very effective in reducing fraud levels."

But a spokesman for HMRC said the new rules from the European Commission would help combat fraud. Leniency for late submissions would be shown in the early stages of its implementation.

He also emphasised that very small businesses would be exempt from the new bureaucracy.

"If the total annual value, exclusive of VAT, of a businesses cross-border supply of both goods and services does not exceed 15,000, (13,460) they are only required to submit an annual EC sales list declaration," he said.

"These arrangements should go some way towards ensuing that the administrative burden on small businesses is kept to a minimum."

Moore and CBI Scotland urged Scottish firms that trade in the EU to check their status with HMRC or their tax advisers.