Case Stud The carrot - UK In the United Kingdom an incentive scheme was introduced to improve compliance amongst those businesses which fail to register for VAT. The incentive scheme was aimed at those businesses which, for whatever reason, have failed to register despite trading above the compulsory turnover limit (currently £56,000) for over 18 months. The scheme gave these businesses relief from the usual penalties and interest connected with substantially belated notifications, although importantly it gave no relief from arrears of tax due since the correct registration date. The integrated strategy for addressing this risk included traditional enforcement methods of bringing businesses onto the VAT register, including covert and overt investigations, and use of intelligence. The rationale for including this scheme in the integrated strategy was that it made sense to give businesses which should have registered some time ago an incentive to come forward voluntarily rather than take the chance of waiting for these more traditional methods. Aspects of the strategy of interest include: use of professionally produced publicity to advertise the scheme;
a definite end date to the scheme (it ran for about 6 months) after which the authority promised to crack down on those found to be continuing not to comply; operation within the existing legislation which allowed waiver of penalties and interest but not arrears; and no discrimination between those businesses which deliberately failed to notify and those which failed because of ignorance of the regulations. The scheme finished in September 2003. Over 3000 businesses took advantage of it, with arrears of tax of over £19,000,000. Included in this total were over 30 businesses with individual arrears each of over £100,000. In addition, the publicity connected with the scheme increased awareness of the registration rules and indications are that many businesses ignorant of the rules have come forward earlier than they otherwise might have done.