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New £7 Billion Tax Black Hole In Public Finances

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New £7 billion tax black hole in public finances

Britain's public finances face a new £7 billion "black hole" after thousands businesses claimed back VAT overpayments they made to the Treasury.

The businesses submitted the claims after the Government was defeated in a series of court rulings which culminated in a High Court judgement last year.

That decision opened up the floodgates for businesses to claim back any overpayments dating back to 1973.

The multi-billion pound bill is a fresh blow for the government, which is already embroiled in a fierce political row over future levels of public spending and debt.

Last night Alistair Darling, the Chancellor, faced questions about his knowledge of the scale of the problem.

Lord Oakeshott of Seagrove Bay, a Liberal Democrat Treasury spokesman, said his party would table parliamentary questions on the issue tomorrow and accused Mr Darling of presiding over a "cover-up culture."

The revelation comes amid evidence that a dispute has flared up among cabinet ministers over how strongly to push the line that the next general election will be fought on a battlefield of "Labour investment" against "Tory cuts".

Gordon Brown has taken a forthright stance on the issue, insisting overall public spending will rise in the next few years to cope with the effects of the recession despite being accused of not telling the truth by the Tories – who insist there will be cuts whichever party wins the election, which must be held by June 2010.

Some ministers, including Mr Darling and Yvette Cooper, the Work and Pensions Secretary, have reportedly argued with the Prime Minister and believe that the government should be more candid about problems posed by Britain's £175 billion budget deficit.

Hilary Benn, the Environment Secretary, admitted on Saturday that his own department was facing budget reductions, and there would have to be "real choices" on spending.

The latest blow to Britain's battered finances is the result of several court rulings dating back to a 1996 decision by HM Revenue and Customs (at the time HM Customs and Excise), to bring in a three-year "statute of limitations" on claims by businesses for the repayment of overpaid VAT.

Before then, businesses could reclaim overpayments dating as far back as 1973 – the year that VAT was introduced.

The Customs decision was challenged in a series of court cases culminating in the House of Lords ruling in 2008 that Customs had not acted properly.

To cope with this, HMRC gave businesses a year, with a deadline of 31 March 2009, to make claims.

As big accountancy firms piled in to what one tax expert called a "once in a lifetime opportunity" HMRC was overwhelmed by the scale of the claims, many of which sought compound interest on overpayments, according to government insiders.

One expert at the leading accountancy firm Deloitte said he understood the total amount at stake to be £7.25 billion – enough to deal a severe blow to Britain's public finances.

In a rearguard action, HMRC has begun the process of challenging the legitimacy of thousands of the claims on the grounds they are not reasonable or that they should be liable for simple, not compound, interest.

Lord Oakeshott said: "This is another gaping hole in Britain's already overstretched public finances."

"It is yet another body blow to Darling's credibility and Britain's credit rating. When did he know the size of these claims? Why didn't he then come clean and what provision did he make for them in his budget?

"Our Debt Management Office has to sell £1 billion of gilts every single working day to fund our deficit. Investors around the world who have to foot the bill are now seriously worried that the Government is turning a blind eye to our ballooning deficit and public sector pensions bill. If Darling was director of a public company the lenders would want his head on a platter.

"The Treasury's ****-up and cover-up culture is deeply damaging to Britain."

A spokesman for HMRC said: “It is not possible to say how much will be repaid until all claims have been verified.

"HMRC has committed extra resources to ensure that claims are paid as quickly as possible. However, payment of claims is subject to verification.

"Refusal and reduction of claims is currently running at over 50%. Many claims also involve complex issues and relate to accounting periods for which records may not have been retained.â€

Uh oh. How on earth are Labour going to worm their way out of this one?

I suppose we can expect a new tax, or a big jump in VAT next year.

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How many black holes are there now?

Oh, I'm sure it's going to be fine. One by one, the black holes will eat each other up until there are no black holes left at all.

Problem solved!

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Guest pioneer31

consolidate allyour black holes into one easy-to-manage black hole.

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All these account failures will be glazed over and sleezebag David Cameron will go after Brown for his dodgy budget figures and his waning authority.

Its just one failure and another now, as the whole house of cards come crashing down.

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Perhaps if we have enough to them they will cancel each other out?

Does this mean we need to borrow some more money?

I thought we were borrowing 500 million per day already. Someone must be getting fed up.

"I'd like to borrow 500 million please"

"Weren't you in here yesterday?"

"Yeh, but it's all gone now"

"Look. Ok, but try to make it last a while this time"

"Thanks" Cut to next day.

"Errm, I would like to borrow 500 million please"

"You Again?"

"Yes, sorry about that, but it's all gone again"

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Indeed - hasn't QE worked out at about £1bn per day since it was started?

So a mere seven days of money printing and we are sorted! Gordon is a genius.

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Indeed - hasn't QE worked out at about £1bn per day since it was started?

So a mere seven days of money printing and we are sorted! Gordon is a genius.

Did I mention state failure yet?

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So what is next? Bond issuance failure, market collapse, international credit spigot turned off?

Printing and looting.

Lots and lots of printing and looting.

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Indeed - hasn't QE worked out at about £1bn per day since it was started?

So a mere seven days of money printing and we are sorted! Gordon is a genius.

A billion every working day and at this rate we'll hit the 150bn mark in 5 weeks time. And then.....? Why not up the rate to 2bn a day.....I don't know why they bother collecting taxes.

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Printing and looting.

Lots and lots of printing and looting.

Y'know, you're actually right.

This is sounding more like the middle section of "Maxwell - the final verdict" (Tom Bowers), where he and (allegedly) his sons send photocopies of share certificates to loads of banks as collatoral for loans then forget to repay them.

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Simples. They will raise VAT to 20+%, probably to the highest percentage they can get away with.

It's like a dark swiss cheese.

Thats an interesting vision. Sounds quite appealing actually.

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remove N Insurance Cap,

sorted, its the right thing to do

Whoops! 85% tax at £100k. Will our doctors want to get up in the morning? Quick, better double the NHS budget again!

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