VAT fraud ― overview

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • VAT fraud ― overview
  • Common types of VAT fraud
  • Investigations
  • Interventions
  • Penalties
  • Penalties for transactions connected with VAT fraud

This guidance note provides an overview of the most common types of VAT fraud that can be committed and how a potential fraud will be investigated by HMRC.

Common types of VAT fraud

The most common types of VAT fraud are:

  • businesses trading over the VAT registration threshold that deliberately fail to register
  • the suppression of sales and / or purchases
  • false invoicing
  • the manipulation of VAT liabilities and accounting schemes
  • missing trader intra-community fraud (MTIC)
  • labour provider fraud
  • smuggling goods

VATF10000

Businesses who deliberately fail to register

A taxable person is a business who is either making or intending to make taxable supplies in the UK, distance sales in the UK, or relevant EU acquisitions of goods in the UK, and may be liable to be registered for VAT or be entitled to register for VAT. If a person is liable to be registered for VAT and deliberately fails to register, he is committing fraud.

Also, if a person is not registered for VAT and is in business and he charges VAT on supplies of goods and services and this VAT is not accounted for to HMRC, the person is committing fraud.

Please see the Overview ― registering for VAT, Overseas business ― registering for VAT in the UK and Penalties ― VAT and excise wrongdoing guidance notes for more information.

Suppressing sales and / or purchases

This is a simple form of VAT fraud and is commonly used in sectors that have a higher number of cash sales; but any type of business can be involved in this type of fraudulent activity. The business will usually suppress the value of the sales

More on Investigations: