VAT fraud

VAT Fraud Solicitors

Being investigated for potential VAT fraud or evasion is extremely stressful. Being charged with VAT fraud is even worse.

As we explain below, with many large scale VAT scams, the perpetrator may well have disappeared. Whilst we have advised a number of clients in relation to these types of alleged frauds, a lot of our work involves advising clients who are being investigated for alleged wrongdoing which does not have a sophisticated, large scale design. We also advise clients who are implicated with carousel or missing trader fraud but who were not the main perpetrators or have been inadvertently part of the scam.

Common types of VAT fraud

These include :

• Carousel fraud – a form of highly organised cross border fraud where VAT is not paid on import but is then charged on sale in the UK and the fraudster disappears with the VAT not being paid to HMRC.
• Missing trader fraud – overlaps with carousel fraud above, characterised by the trader disappearing without paying VAT to HMRC.
• Cash fraud – where a business can be shown to be deliberately taking cash payments, typically offering a slight discount to the customer, where no VAT is charged and the transaction is not recorded for VAT.

Fraud or evasion?

By it’s nature evading correct recording, charging and payment of VAT to the Revenue can constitute fraud. However, what is perhaps the grey area is the way HMRC will deal with fairly low level vat tax evasion as opposed to highly sophisticated, pre-planned VAT fraud which can deprive the Revenue of millions.

With evasion, the HMRC may well use the threat of potential fraud charges somewhat tactically. In these cases, which can be where HMRC can only legally prove a certain amount of underpayment but suspect a higher amount, good legal advice can be really important in obtaining a resolution with HMRC which does not result in you being charged with fraud but also means you do not panic and end up admitting to and paying an amount which is possibly much higher than the amount you ought to pay the Revenue to reflect the misconduct.

Types of HMRC Tax Fraud Investigation

If you receive notification from HMRC that they are investigating you or your business in terms of what are known as “Aspect” or “Full” investigations, you have reason to be concerned. With the aspect type investigation, as the title suggests, HMRC will want to look at certain aspects of your VAT. These types of investigations can often arise where your VAT records and/or payments seem to be materially different from sector, trade or business type norms. 

Civil penalties for VAT evasion

As we explain above, in the majority of cases HMRC, in reality, use civil rather than criminal penalties. This does not mean the penalties are insignificant.

HMRC have strong civil enforcement powers for evasion including :

• Imposing fines.
• Making it difficult for the business to continue trading.
• Naming and shaming individuals who have failed to pay fines of over £25,000.00.
• In some cases disqualifying company directors who can also be fined significant amounts personally for failing to co-operate once HMRC start investigating.

VAT Fraud advice and defence

If you need advice on any aspect of dealing with or defending a VAT issue flagged up by HMRC please get in touch. We offer the benefit of genuine day to day experience so know the law but also how best to protect you tactically and in possible negotiations with HMRC.