Blog DOB: 22 Aug, 2006
Name: Mark O'Connor
Me in the Antarctic
Really Annoying Sh##
This is my blog where I can dump all the sh## that really annoys me. It stays here, I can get on and enjoy myself. It's like therapy, and you can join too for free. Just add yourself as a blogger and get rid of all your sh##.
I am still astonished that this actually happened, particularly when there are estimated to be over 400,000 illegal immigrants in the UK.
I have a contract with a UK entrepreneur. He has businesses in the UK and Hong Kong and recently looked to acquire an IT Service business in Bangkok.
His UK company invited a Thai national, "Kay", to visit his UK office to discuss a possible employment offer in Bangkok or Hong Kong. Despite an official company invitation a visitors visa was refused, to make matters worse, "Kay" was not even interviewed by the British Embassy in Dublin.
UK Visas claim to "issue visas to 80% of those who apply, and stop only those who are a significant immigration risk to the UK".
Kay was on a two week holiday in Ireland when we contacted her and asked her to make a short visit to us in the UK. She was already in the EC. The Irish Honorary Consul in Bangkok had ascertained her local circumstances and granted a visa to her. In a seeming vote of no confidence in the Irish immigration process the UK Embassy in Dublin would not let her visit London (clearly determining her to be a significant immigration risk).
Despite being invited to the UK by a UK company, despite having an onward ticket to Bangkok, despite having a letter of sponsorship from an accountant living in Surrey, despite already being in the EC, despite being granted a visitors visa to Ireland Kay, an employable young graduate, was refused UK entry clearance.
As a consequence the UK company had to fly a representative to Bangkok to hold the meeting which should have happened in the UK.
Words like bumbling and ludicrous come to mind. Have you ever had a similar experience?
On the 4th July I applied online for a VAT registration number for a small company. The company, a home business, is estimated to turnover no more than £75K.
In the application the activities of the business were described as "General trade of hardware and previously owned goods to end users and resellers."
The application prompted an enquiry for further information. Bearing in mind the size and scale of the business, the questions from the VAT office included (these were some of the best)
|1||We note that you have entered the same address for your business and your home. Do you trade from home? If not please provide your business address.||No, I didn't make a mistake completing the application. Don't you think I would have checked it before submitting it? This is a home business.|
|2||If you do work from home, please describe how you do this, ie where is the stock kept?||Eh..... in the garage, in any of the rooms. How much space do you think £1,000 of stock would take up|
|3||Please provide your business plan||Look at the size of the business. This business is not looking for bank loans or angel finance or any kind of investment why would it incur the cost of preparing a formal business plan?|
|4||Advertising material for the business||Would a start-up company be (a) better off picking up the phone and trying to talk to people or (b) incurring print and postage costs sending out junk mail?|
|5||Please provide copies of signed contracts.||Signed contracts? What buyer in their right mind would sign a contract for the supply of hardware from a start-up company which isn't even VAT registered?|
The process of starting a business is being stifled even further by having to wait in excess of three months for a company to be VAT registered. During that time you have to answer queries which can't be regarded as sensible and which could have been avoided with an effective risk based approach, an improved application form and some intelligence applied to the process. Instead, it seems as if every application is being treated as a fraudulent application.
In this example: the small company applies for registration on the 4th July. On the 26th August HMRC write to say it may take an additional 12 weeks, bringing total time taken to almost five months. During that time I have to increase my price to include VAT and tell customers I will sort them out with a tax invoice later. Incredible.
If you are registering a company for VAT in the UK be sure to factor in a considerable amount of idle time while you wait. In the meantime what can you expect? Well, HMRC ask you to add VAT to your sales price and tell your customer you'll sort him out later with a tax invoice.
Yeah right! If your supplier asked you to do that what would you think? i know what I'd do if I was the customer.
What can possibly take so long? You're not likely to find out. HMRC, a public service body, instructs (their emphasis) "You should not contact either this office or the National Advice Service to see how your application is progressing. As you may appreciate, dealing with constant phone enquiries can further delay the processing time."
This letter, of course, isn't at all consistent with the information on the HMRC website. There in the FAQ's section under "When will I get my VAT registration number?" it says "...it may take up to 8 weeks to complete the registration process as we are now carrying out a wider range of checks on every application." and "We expect to be able to issue you with a VAT registraiton number in about 8 weeks but it may not take this long."
So riddle me this, Riddler: what on earth can take HMRC twenty weeks to process a VAT application which was correctly completed to start with?
The last word
Is it a solution to devise a system of controls, designed to prevent an abuse by a minority, and apply them indiscriminately to everyone? I like the story of the courageous retailer who successfully improved her business model by deciding to focus on selling to the majority rather than preventing theft by a minority. The change in focus, leading to tangible changes to the store layout and removing restrictions like the number of items a shopper could bring into the dressing room, led to strong retail sales growth without an increase in theft.
Even with our Government Think Tanks and the intelligence of many civil servants you would think a better solution could be devised, rather than a fix, which must naturally assume everyone a crook.
It can now take over three months and up to five months to get a VAT registration number from HMRC as they seem unable to apply any form of risk management or triage to the registration process. You have small "rinky dinky" companies being asked to provide business plans and marketing material, and they can be still turned down for registration for not supplying more information; none of which is asked for at the registration stage.
Right now this situation would seem to be permanent. I have two new companies registering for VAT. Company A applied for registration on the 6th June and is still not registered. I received a letter to Company B this morning advising me that it may take another 12 weeks. Company B is registering on a voluntary basis with monthly turnover not expected to exceed £6,000.
However, what I find most disconcerting about this process is HMRC stating on their website:
"Although you cannot charge VAT before you are registered or show VAT as a separate item on any invoices you issue, you can change your prices to include VAT. You can do this from the date you should be registered and before you receive your Certificate of Registration. You will need to explain to your customers that you will be sending them VAT invoices later."
I can change my price to include VAT but can't show it on the invoice, so my customer is unable to reclaim any of this VAT until I later provide him with a VAT invoice. As a customer I would assume my supplier is pulling a fast one, I will never get an invoice. I would certainly not pay over the full amount, and then we are in the wonderful accounting world of part payments, later followed by credit notes and re-issued invoices.
As a customer, unless I am buying from a personal service company, I wouldn't buy stock from a company which is not registered for VAT, as I wouldn't believe in the substance of it.
Being the sole director of an existing company which is VAT registered and always pays its VAT on time means nothing to HMRC if you wish to start another company. They will approach your application as though your intent is to fraudulently register for VAT. The fact you might be a home owner in the UK, be the member of a professional body, have previously worked in government, pay your VAT on time are not considered as no risk assessment is applied. Is this the best use of tax payers money? Surely there is something fundamentally wrong with the registration process.