DPP Business Tax

Missing Trader VAT fraud

HMRC’s approach to Missing Trader Intra-Community (MTIC) Fraud has become more aggressive than ever, as the Treasury admits that it is losing over a billion pounds each year.

Under the traditional rules, anyone selling goods in the UK is charged 20 per cent VAT. This is a charge that goes directly to HMRC.

However, down to a combination of fraud and error, many are failing to do this.

Overseas sellers in China, in particular, are coming under fire for conducting “fraudulent and unethical” business.

Suppliers from China and other overseas countries have been selling goods on Amazon for many years at very low prices. These items have been stored in large “fulfilment” warehouses in the UK in order for them to be shipped to customers quickly. However, it has also allowed some traders to dodge tax, enabling them to sell their goods at rock bottom prices.

Effects of MTIC Fraud on the British Economy

This has led to estimates of between £1 billion and £1.5 billion in lost tax revenue in 2015/2016.

Critics have claimed that traders who are participating in MTIC fraud have also contributed to British suppliers not being able to compete on prices and forcing them into the ground.

Only three years ago, in 2014, HMRC identified online VAT fraud as one of its key risks. It concluded it was ‘highly likely that both organised criminal groups based in the UK and overseas sellers in China were using warehouses to evade VAT and ‘facilitate the transit of undervalued or misclassified goods’.

Despite this, there have so far been no successful prosecutions for VAT fraud, and retailers like eBay and Amazon are increasingly being criticised for facilitating the ease of this category of fraud.

The argument from online marketplaces is that overseas sellers are not aware that they have to pay VAT and that once the transaction has taken place, it is impossible to assess whether the right taxes have been paid.

Updated Rules on Financial Responsibility

In September 2016, the Government introduced new rules which meant online marketplaces were obliged to share the responsibility of making sure the right taxes were paid.

The new Finance Bill demands that a marketplace, like eBay, should ban sellers that HMRC has identified as committing VAT fraud for 30 days. If this fails to happen, the market place is obliged to pay the VAT.

According to HMRC, the number of overseas retailers selling goods in the UK registering for VAT has increased tenfold since 2016.

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If you need assistance with a VAT Missing Trader Fraud issue, contact our team of dedicated and specialist solicitors here

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