VAT fraud ― overview

Produced by Tolley
VAT fraud ― overview

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

  • VAT fraud ― overview
  • Common types of VAT fraud
  • Businesses who deliberately fail to register
  • Suppressing sales and / or purchases
  • False invoicing
  • Manipulating liabilities and accounting schemes
  • Missing intra-community fraud (MTIC) (until 1 January 2021)
  • Labour provider fraud
  • Application of the domestic reverse charge to specific transactions
  • Smuggled goods
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

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:

  1. businesses trading over the VAT registration threshold that deliberately fail to register

  2. the suppression of sales and / or purchases

  3. false invoicing

  4. the manipulation of VAT liabilities and accounting schemes

  5. missing trader intra-community fraud (MTIC) (until 1 January 2021)

  6. labour provider fraud

  7. smuggling goods

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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 (until 1 January 2021), 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, they are committing fraud.

Also, if a person is not registered for VAT and is in business and they charge 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 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

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