VAT refunds 'could be reduced'

Business owners who have been charged too much VAT could face a reduction in the amount of compensation they receive, as a result of plans outlined in last week's Budget.

HM Revenue and Customs (HMRC) will no longer allow VAT and Duties Tribunal to set compensation levels for business owners who have paid too much, the Financial Times reports.

If HMRC plans go ahead the old compensation system will be replaced with a set interest rate.

"Setting an interest rate in stone will mean many receiving less compensation and will not make up for their losses during the period the tax was overpaid," Glyn Edwards, VAT consultant at CCH accounting firm, commented.

Mr Edwards said the old system was much fairer to business owners but added that it did not benefit HMRC.

VAT returns and registration can now be done online through the HMRC website.