VATF21000 - What is VAT fraud?: introduction
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VAT fraud covers a wide array of different types of fraud using both goods and services, including:
- unregistered taxable persons (VATF23100)
- suppression of sales and/or purchases (VATF23200);
- false invoicing (VATF23300);
- manipulating liabilities and accounting schemes (VATF23400);
- Missing Trader Intra-Community (MTIC) fraud (VATF23500);
- labour provider fraud (VATF23600); and
- smuggled goods (VATF23700).
The above list is not exhaustive.
By far and away the largest fraud to have been undertaken is MTIC fraud (more recently known as Supply Chain fraud). HMRC has estimated that MTIC fraud cost the UK exchequer:
| MTIC Fraud | 2005-06 | 2006-07 | 2007-08 | 2008-09 | 2009-10 |
|---|---|---|---|---|---|
| Attempted fraud (£bn) Upper bound | 5.0 | 4.0 | 2.0 | 2.0 | 2.0 |
| Attempted fraud (£bn) Lower bound | 4.0 | 3.0 | 0.5 | 1.0 | 1.0 |
| Impact on VAT receipts (£bn) Upper bound | 3.5 | 2.5 | 2.0 | 2.0 | 1.5 |
| Impact on VAT receipts (£bn) Lower bound | 2.5 | 1.5 | 0.5 | 1.0 | 0.5 |
The figures for MTIC fraud are published annually in the ‘Measuring Tax Gaps’ publication, which can be found on the HMRC website. HMRC no longer publishes a separate MTIC/Supply Chain fraud estimate.
These losses represented a significant depletion of the revenues which are provided by UK taxable persons.
This and the following sections discuss:
- what VAT fraud is (VATF22000);
- some different examples of VAT fraud (VATF23000);
- what to consider prior to using an intervention (VATF30000);
- what interventions are available to you if you discover VAT fraud (VATF40000 and VATF50000);
- indicators of contrivance (VATF60000);
- why due diligence and risk assessments are important (VATF70000);
- what to do if you discover VAT fraud (VATF80000); and
- what to do if the taxable person appeals (VATF90000).