VAT fraud investigations can be complex, time-consuming and significantly disrupt your business’s day-to-day operations. HMRC takes VAT fraud extremely seriously, and the penalties for those found to have committed it can be severe. It is, therefore, vital to take advice from a VAT fraud investigation specialist as soon as the possibility of an investigation arises.
We have a dedicated HMRC team of solicitors and barristers, all of whom are VAT fraud investigation specialists. We work with businesses of all sizes facing a VAT fraud investigation, from sole traders to SME’s to large corporations. Our advice is concise and straightforward, and we focus on minimising the disruption to your business and securing the most lenient penalty in the event your actions are deemed fraudulent.
What is VAT Fraud?
VAT fraud ranges from basic fraud involving one business acting alone, to complex, cross-border, coordinated schemes involving a network of enterprises.
The types of conduct that might constitute VAT fraud are wide and varied, but some common examples include the following:
- Cross-border VAT fraud whereby fraudsters do not pay VAT on imported goods but charge it to the customer.
- Cash VAT fraud, whereby a trader works for cash, does not charge VAT or record the transaction for VAT purposes.
- Online VAT fraud, whereby online sellers do not correctly account to HMRC for the VAT payable on transactions with UK consumers.
What can prompt a VAT Fraud Investigation?
VAT fraud costs the revenue billions of pounds annually, so HMRC understandably rigorously enforces VAT rules, and conducts thousands of VAT fraud investigations each year. Businesses used to be selected to undergo an investigation at random, but nowadays, HMRC takes a more targeted approach, using a risk-based assessment.
Sometimes, a business is selected for no other reason than they operate within an industry identified by HMRC as ‘high risk’, such as the construction industry. Other times, a VAT fraud investigation may be triggered by a tip-off or irregularities in the business’s VAT records.
If you are concerned that you might be at risk of a VAT fraud investigation, speak to us. A VAT fraud investigation specialist in our team will review your VAT records and the circumstances giving rise to your concerns, consider your position and advise on the best way forward.
What happens during a VAT Fraud Investigation?
During a VAT investigation, HMRC officers will visit your premises to inspect your VAT records. Usually, you will receive notice of their intention to conduct a VAT investigation, but HMRC can visit without warning.
As a general rule, HMRC’s investigations are limited to records dating back 4 years. However, if the officer believes you have acted carelessly, they may extend their investigations to records dating back 6 years. In cases where fraud is suspected, the officer may demand access to records going back 20 years.
VAT investigations are incredibly thorough, and it helps to be properly prepared ahead of the officer’s visit. A VAT fraud investigation specialist will work with you to ensure all relevant documentation is in order and guide you through the process, liaising with your other tax advisors and HMRC on your behalf, where necessary.
What happens if you are found to have committed VAT Fraud?
The penalties for VAT fraud can be harsh. Generally speaking, HMRC prefer civil penalties over criminal ones, since civil proceedings tend to be more straightforward and result in HMRC receiving the lost funds more quickly.
The civil penalties depend on the nature of the fraud and include payment of the VAT evaded plus a penalty of 100% of the amount owed. Sometimes, HMRC might publicly ‘name and shame’ businesses involved in VAT fraud, causing significant reputational harm.
In serious cases, HMRC are not averse to pursuing a criminal prosecution, if the conduct warrants it and the criteria are met. If convicted, a Defendant faces an unlimited fine and imprisonment.
Given the severity of the penalties, speaking to a VAT fraud investigation specialist is crucial if you believe you may have committed VAT fraud. Voluntary disclosure to HMRC can significantly reduce the penalties imposed and allow you to continue trading with minimum disruption.
How can our VAT Fraud Investigations Specialists help?
Our experience and expertise in all HMRC-related matters, including VAT fraud, has earned our VAT fraud investigations specialists a reputation for excellence in the area. We are familiar with the inner workings of HMRC, understand their policies and can pre-empt their likely reaction to any given circumstances. As a result, we can ensure you are best placed to deal with a VAT fraud investigation and secure the most lenient penalty possible if you are found to have acted fraudulently.