What is VAT fraud?

VAT fraud is a form of tax evasion and it occurs in many ways. Common VAT frauds involve charging a customer VAT but then pocketing the cash and not accounting for it to HMRC. In addition, the fraudster may request cash without issuing an invoice or request payment to someone other than the supplier or use a VAT number that is false or is registered to another trader.

VAT fraudsters are usually able to charge less than honest VAT registered traders for the same goods or services because they have a 20% pricing advantage. This helps to drive honest traders out of business and undermines the tax system.

Patrick Cannon is a specialist VAT fraud barrister and can advise you in defending VAT fraud allegations. He also works as counsel with VAT fraud solicitors.

Patrick is an expert VAT fraud lawyer and is able to assist you if you have been reported for VAT fraud, are under VAT fraud investigation, are experiencing VAT repayments being withheld, enquiries and investigations or prosecutions in relation to carousel fraud (also referred to as MTIC fraud), it is important to seek specialist VAT fraud legal advice before you agree to an interview under caution.

Contact Patrick Cannon now if you are under investigation for VAT fraud.

VAT Fraud

More sophisticated examples of VAT fraud involve VAT Carousel Fraud or MTIC VAT fraud which can be complex to unravel because of the number of businesses involved in a chain of supplies and the trading relationships. It can be difficult to show who has been knowingly involved and either knew or ought to have known what was going on in relation to VAT. The question of knowledge is crucial in VAT fraud cases.

This type of fraud involves goods being imported VAT-free and sold on at VAT inclusive prices. The company at the start of the chain then disappears without paying HMRC the VAT charged when selling the goods on. These companies are known as ‘missing traders’. The goods are then sold down a chain of companies known as ‘buffer’ companies which are used to disguise the paper trail of the fraud. The final company in the chain exports the goods free of VAT but reclaims the VAT it paid on its purchase hence the VAT repayment fraud. If this was a legitimate purchase, then the reclaim of VAT would have been allowable. Often the same goods are imported again into the UK and the process starts again. Hence the term ‘carousel fraud’ of “missing trader VAT fraud”, due to the same goods going around again and again.

Online VAT fraud is another type of VAT fraud and it occurs when overseas or UK online sellers fail to pay the correct amount of VAT on transactions to UK consumers. Digital marketplaces are under a legal obligation to ensure all sellers display a valid VAT number on their online pages. They are also liable to pay VAT on any sales that take place where they ‘knew or should have known’ a seller was not VAT registered. If the marketplace through whom the online seller operates fails to remove the seller then HMRC will seek to recover any future unpaid tax from the marketplace itself.

VAT Fraud Penalties

HMRC usually deal with VAT fraud under the civil evasion penalty regime. For VAT and VAT credits the penalty is 100% of the amount evaded. For VAT refund and repayment fraud, the penalty is the total of the amount of input tax which was overstated and output tax which was understated. A reduction in penalties can apply of up to 40% if the taxpayer makes a voluntary unprompted disclosure to HMRC and co-operates in resolving the tax due.

However, in serious cases that meet one of the criteria for a criminal prosecution, HMRC may seek to commence proceedings in the criminal courts. The deliberate evasion of VAT is an offence under section 72(1) of the Value Added Tax Act and the maximum penalty for offences tried in the Crown Court is 7 years imprisonment and an unlimited fine.

The VAT fraud sentencing guidelines for those convicted of VAT fraud are here.

How Patrick Cannon can help

Patrick Cannon is a specialist VAT fraud barrister and can advise you in defending VAT fraud allegations.

He also works as counsel with VAT fraud solicitors. Patrick is an expert VAT fraud lawyer and is able to assist you if you have been reported for VAT fraud, are under VAT fraud investigation, are experiencing VAT repayments being withheld, enquiries and investigations or prosecutions in relation to carousel fraud (also referred to as MTIC fraud), it is important to seek specialist VAT fraud legal advice before you agree to an interview under caution.

Contact Patrick Cannon now if you are under investigation for VAT fraud.

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For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.