WTO - Non-discrimination; is HMRC misbehaving?

Under WTO non-discrimination rules, an overseas business should not be put at a disadvantage over a domestic business.

The requirement to appoint a tax representative who should not only be jointly and severally liable for the tax payable, and in doing so is "expected" under the "fit and proper person" rules to obtain a financial guarantee seems to go further than is required for any domestic business.

Yet HMRC has also taken the power to require an overseas business to provide HMRC with "security". Now, this is interesting in two cases. The first is that the aim seems to be to take a double indemnity with certain overseas businesses, and that seems to be discriminatory under WTO non-discrimination rules, and secondly, whilst there are indeed rules requiring domestic companies to provide security for VAT (and PAYE), this will normally only be so where the business, or more properly the business owners, have a poor compliance history.

I remain to be convinced that the actions sought to be taken by HMRC seeking a double indemnity are not discriminatory. This is even more the case with EU businesses, as the UK has powers under the CTA to obtain mutual assistance from home tax authorities to collect a UK tax debt - no less than a triple indemnity. I am even more concerned that HMRC's VAT Manual when discussing indemnities does not even mention the provisions of the CTA.

Why worry? Well apart from the pfaff and cost of obtaining bank guarantees, if an overseas business runs up a big debt to the Revenue, it is possible that because of HMRC taking a belt, braces and nail through the head approach to indemnities, it could well be that the company could get away with it either in the UK courts or, in the case of EU businesses, in their home courts. And there is some evidence that that could be the case, where at least one EU member state has dropped the joint and several liability requirement for UK businesses because of the mutual assistance provisions of the CTA.

I would suggest that HMRC needs to review its policy immediately. In the meantime, if you believe that you have been subject to discriminatory action by HMRC, please contact us and we will be pleased to discuss it with you.

https://www.gov.uk/hmrc-internal-manuals/vat-registration-manual/vatreg37400

Steve Botham CTA

www.covertax.co.uk; www.ukvatagent.co.uk

+44 (0) 845 6543 5450