Businesses made 314,000 VAT applications last year, of which 261,000 were successful. But 52,000 applications failed to meet stringent HMRC rules, while a further 1,000 applications were withdrawn.

HMRC’s is exercising ‘excessive caution’ with fraud in VAT applications, warned accountants at Lubbock Fine, which could be a deterrent to growth although it is leading to HMRC clamping down on fraudsters – with some illicit traders facing substantial penalties.

 But there is also a problem for businesses as HMRC customer service operators are struggling to deal with the volume of calls to helplines.

The average business caller now waits over 25 minutes to connect with a VAT officer.