Approval by Customs and Excise of payment card VAT accounting arrangements is a major step towards electronic government services. AMEX and VISA can now offer suppliers a system that produces an electronic file containing as much detail as a paper invoice. This eliminates a whole chain of paperwork. Development work started two years ago and trials in the last three months have convinced Customs that the system is reliable.Customs were concerned that there is a clearly identifiable audit trail. The trial has demonstrated that the data provided in the electronic file will provide a trail through which it will be possible to verify that the correct amount of VAT has been calculated and accounted for. Initially there were also doubts about transactions where more than one bank is involved.
The take-up of the new facility is likely to be limited to larger companies initially, but there is potential for extensions to all card transactions. The system has been approved for use in Germany and extension is planned to France, Belgium, Switzerland and Ireland.
The development illustrates an electronic system gives all round benefits. Ms Sarah Allen, head of commercial card products for Natwest said that savings on 200m low value purchase orders per year could top Â£8b. For Customs and Excise the main benefit will a significant contribution to reducing burdens on business.