Carousel VAT fraud is one of the most serious types of tax evasion, for which the penalties can be severe. Furthermore, companies caught up in a fraudulent supply chain can be prevented from claiming the input tax linked to the fraudulent transactions, even if they had no knowledge of the fraud.
If you are implicated in a carousel VAT fraud, expert legal advice is essential. Our HMRC solicitors and barristers are renowned for their work in this niche area and are perfectly placed to provide the guidance and support you need to successfully navigate the issue.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
What is Carousel VAT Fraud?
Carousel VAT fraud involves the evasion of VAT and is usually undertaken by organised criminal gangs. The fraud starts when goods are imported, VAT free, into the UK. VAT can then be charged on those goods and should be declared, but in carousel fraud, the goods are instead brought and sold by a group of companies, going round and round like on a carousel, with no VAT ever being paid. Those companies subsequently claim repayment of VAT on the goods in question, even though none have ever paid it.
What are the penalties for Carousel VAT Fraud?
The penalties for VAT fraud in the UK are severe. Where HMRC establishes that deliberate VAT evasion has taken place, the perpetrators may receive an unlimited fine and face seven years in prison. In cases involving carousel fraud, perpetrators may be charged with cheating the public revenue, the penalties for which include a long stretch in prison, sometimes up to 17 years.
What happens if you get caught up in Carousel VAT Fraud?
Unfortunately, innocent companies can sometimes get caught up in carousel VAT fraud. Even though they were unaware of the fraud and did not take part in it, those innocent companies can still be penalised if HMRC can prove that they ‘knew or should have known’ about the fraudulent activity. Since those responsible for carousel VAT fraud are often sophisticated criminal gangs, they frequently disappear without a trace, leaving the innocent companies as the only ones traceable by HMRC. If HMRC believes you should have known about the carousel fraud, you may be unable to claim any input tax linked to the transactions in question.
Accordingly, the onus is on you, as a business owner, to verify the legitimacy of any transaction you take part in.
How can you confirm the legitimacy of a transaction to avoid becoming involved in Carousel VAT Fraud?
Given the complex nature of carousel VAT fraud, it is often incredibly difficult to spot. However, there are a number of red flags that can indicate that everything may not be as it seems with a transaction. By knowing what to look out for, you can reduce the risk of inadvertently getting caught up in carousel VAT fraud. potential red flags include the following:
- Newly established companies with no financial or trading history.
- Businesses run by individuals with little knowledge of the products they sell, or the market in which they operate.
- Businesses operating from residential premises.
- Businesses offering an easy profit with no apparent catch.
To assist you in establishing whether any of the red flags we mentioned above are present, you might undertake the following due diligence:
- Visiting the business’s premises.
- Insisting that you deal with someone holding a senior position within the business.
- Checking important company documentation, such as the certificate of incorporation and VAT certificate.
- Carrying out background checks on the company, such as credit checks.
- Asking for references from others with whom the business has previously transacted.
HMRC only expects you to do what is reasonable to identify any issues in your supply chain. If you take reasonable steps and do not identify any anomalies, the risk of HMRC subsequently declaring you should have known about the carousel fraud is significantly reduced.
However, what is reasonable will depend on the circumstances. For example, more extensive due diligence may be required in connection with sectors that are particularly vulnerable to VAT fraud or other criminal activity. If you are unsure, legal advice is essential.
How can we help if you get involved in Carousel VAT Fraud?
Our expert HMRC solicitors and barristers are dedicated to providing specialist legal advice to anyone involved in an HMRC matter of any nature, including carousel VAT fraud.
We will advise you on your legal position, represent you during any meetings with HMRC, and ensure its officers treat you fairly and do not exceed their powers. With our extensive experience in HMRC matters, including carousel VAT fraud, you can be confident that, with us by your side, you will secure the best outcome possible.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
