V5.225 Powers to enforce compliance
HMRC is given wide powers in order to carry out their duties in an efficient and economical manner. The extent of these powers is described in V5.231–V5.241. The system of assurance visiting would be frustrated, and the revenue placed at risk, if traders were able to prevent assurance officers exercising their powers. The legislation therefore sets out a system of sanctions which largely renders lack of co-operation a self-defeating exercise.
Sanctions are classified under the following headings.
HMRC may, as a condition of repaying any input tax to any person, require the production of such evidence relating to VAT as may have been supplied to him1. Thus, where assurance officers wish to verify a repayment claim, the obvious sanction is to withhold repayment if the person declines to produce the required evidence. The ECJ has suggested that, in accordance with the principle of proportionality, a trader should be permitted to provide an alternative form of security, rather than simply being denied repayment2. There are limits, however, even to this requirement; in Sosnowska3, Polish legislation allowed the authorities to withhold repayment to newly registered businesses for a period of up to 180 days unless a security deposit of PLN 250,000 was paid. The ECJ held that this was precluded by the principle of proportionality; the security deposit was not proportionate either to the amount of the excess VAT to be repaid or to the economic size of the taxable person. In particular, the lodging of
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