Missing trader intra-community fraud (MTIC)

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

  • Missing trader intra-community fraud (MTIC)
  • MTIC VAT fraud
  • Specified goods
  • Parties involved in MTIC fraud
  • Types of MTIC fraud
  • Disallowing input tax
  • Joint and several liability
  • Preventing MTIC fraud
  • Refusing zero-rating in respect of dispatches when the customer has acted fraudulently
  • Refusing zero-rating in respect of exports / dispatches when the business has committed a fraud
  • Refusing zero-rating in respect of goods supplied under the onward supply relief (OSR)
  • Irrecoverable acquisition tax
  • Other interventions
  • Penalties for transactions connected with VAT fraud
  • EU initiatives
  • Appeals

This guidance note provides an overview of what constitutes MTIC fraud and the action that can be taken by HMRC to combat this type of fraud. This note should be read in conjunction with the MTIC fraud ― application of the domestic reverse charge for mobile phones and computer chips and MTIC ― carbon emission trading guidance notes.

The UK has also introduced several domestic reverse charge measures and details of these can be found in the Domestic reverse charge ― wholesale trading in electricity, gas and electronic communications services and construction labour and Supplies of non-investment gold guidance notes.

MTIC VAT fraud

MTIC fraud basically works when a supply chain is created and, at some stage, a key player in the supply chain disappears. The chain normally involves goods being purchased from a supplier in another EU country, who does not charge VAT to the UK customer because the business is given the customer’s UK VAT number. The business acquiring the goods from the EU supplier normally sells the goods onto another UK company and charges VAT but fails to pay this output VAT to HMRC. Please note that services can also be subject to MTIC fraud as well.

DMBM875550; VATF10000, VATF23510; JSL1000; The Value Added Tax (Amendment) (No 2) Regulations 2010, SI 2010/2240 (subscription sensitive); VATA 1994, s 77A; 2007/250/EC ; Value Added Tax (Section 55A) (Specified Goods and Excepted Supplies) Order 2007, SI 2007/1417 (subscription sensitive); De Voil Indirect Tax Intelligence, 195 (22) (subscription sensitive)

HMRC has introduced a number of measures to try to tackle this fraud, which are covered in more detail later in this guidance note:

  • introduction of joint and several liability
  • disallowing input tax

HMRC has also introduced a reverse charge provision which

More on MTIC and other missing trader fraud: