HMRC criticised for VAT reforms

A new report has criticised HM Revenue & Customs (HMRC) for the way it has altered the VAT registration system.

In its report on HMRC's accounts for last year, the National Audit Office (NAO) suggested that the VAT revamp - designed to prevent criminals from getting access to the system - also caused significant delays for many legitimate small businesses and sole traders.

Factors like staff shortages at HMRC and an old computer system meant that the organisation could not adequately cope with VAT registrations for part of 2007.

However, the NAO did acknowledge that performance begun to improve from the start of 2008 and that 83 per cent of applications were being processed within the 14 calendar day target by March.

Tim Burr, head of the NAO, commented: "The department must strike a balance between stopping criminals entering the VAT system and ensuring legitimate traders receive their VAT registrations without delay.

"Its performance in processing VAT registrations is now operating in line with targets."