VAT Repayment Fraud
Value Added Tax (VAT) is a charge made on a supply of goods or services made in the UK which are classed as taxable supply. VAT must be collected by a taxable person in the course of business. A taxable person is a person required to be registered for VAT purposes. Input tax is a tax paid by a particular person on the supply of the goods and services to that person. Output tax is a tax charged by a business when it is supplying goods and services.
What is VAT Repayment Fraud?
False claims to VAT refunds are a form of VAT fraud, where a business submits VAT returns claiming a net repayment of VAT on the basis of, for example, zero rated exports supported by false export documents or certificates of shipment. The goods themselves remain in the UK and are sold at a VAT inclusive price, usually for cash and unrecorded in both the vendor and purchaser’s business records. They may also be sold under cover of false sales invoices to dupe prospective buyers as to the authenticity of the transaction, but also to add further VAT to the profit.
Repayment frauds can be single cell frauds i.e. where one individual or business is involved, or multi cells, where a systematic attack on the VAT system is undertaken by one or more individuals using several businesses, with VAT returns being submitted from businesses with addresses in different parts of the UK to prevent the VAT authorities from connecting those behind the frauds. HMRC has improved the exchange of information procedures within its organisation to identify this type of fraud as soon as possible, but failures to identify missing traders in the early stages of carousel frauds highlighted the vulnerability of the VAT system to organised criminals.
Penalties for VAT Repayment Fraud
Indictments usually include offences under VAT Act 1994 s 72, and/or the common law offence of cheating the public revenue.
Please click here for more information on HMRC Penalties.
Expert London VAT Investigation Lawyers
If you need HMRC VAT Investigation advice, we are available to aid you at every stage of the HMRC investigate process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, criminal tax evasion and HMRC enquiries and investigations. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.
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