Cash accounting scheme: Manipulation of the scheme: Withdrawal of entitlement to begin using the scheme
Regulation 58(4) allows HMRC to protect the revenue by withdrawing entitlement to begin to use the scheme. This states that
58(4) A person shall not be entitled to begin to operate the scheme if the Commissioners consider it is necessary for the protection of the revenue that he shall not be so entitled.
This is in addition to the power to withdraw entitlement to continue to use the scheme on the grounds of protection of the revenue under Regulation 64(1)(d). (Further guidance on protecting the revenue is at VCAS4400 and VCAS6150).
The two Regulations complement each other and ensure that HMRC are appropriately equipped to deal with instances of manipulation by those businesses determined to obtain additional tax or competitive advantages at the expense of honest businesses and the tax payer in general.
If, having considered all the evidence, you decide to withdraw entitlement to begin to use the scheme you must advise the business in writing, explaining the reasons for your decision, quoting the legal vires for the withdrawal, and including a time limit during which the entitlement is withdrawn.
The time limits during which entitlement to begin using is withdrawn have to be decided on the basis of what is reasonable in each case. As a general guide, policy advice is to exclude for a period of 12 months after the date of the letter.
Notice 731 (GOV.UK) advises businesses wishing to have such a decision reconsidered to provide further relevant information or further facts that they consider may not have been fully taken into account. Due consideration should be given to such requests and a written response provided.