DMBM875550 - RLS: Missing VAT customers: Fraud indicators

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In the scenarios outlined below, the disappearance of the customer is essential to the fraud.

Whenever fraud is suspected, consult your line management immediately to consider whether you should refer the case to the Regional Referral Team (formerly known as the Local Fraud Unit) or the National Asset & Security Team (NAST).

Input tax frauds

A bogus business, or chain of businesses, is deliberately set up to obtain VAT repayments, and goes missing once repayment has been made. Other times, a bogus business continues to “trade”, apparently legitimately, until a visit is booked or made. Combinations of the following features may point towards potential fraud:<ul><li class="dash">businesses that go missing at any approach for control purposes</li><li class="dash">repayment classified traders who repeatedly postpone visits, fail to produce records or cannot be contacted</li><li class="dash">the business address is non-existent or inconsistent with the declared trading activity</li><li class="dash">“mushroom” traders, who set up and then display sudden and rapid growth in tax throughout and turnover, indicating an input tax fraud or involvement in Missing Trader Intra-Community VAT fraud (MTIC).</li></ul>If input tax fraud is indicated, consult line management to consider contact with Criminal Investigation. For more information see V1-37 Input tax frauds.<h2>Missing Trader –Intra-Community (MTIC) fraud</h2>MTIC VAT fraud is currently the costliest form of VAT fraud facing the UK. It exploits the Single Market rules that were introduced in 1992. The fraudster must obtain a VAT registration number to enable him to purchase goods VAT free from another EU member State. He then sells on these goods in the UK to other VAT registered businesses, at VAT inclusive prices. These businesses pay the VAT to the fraudster who promptly goes missing without accounting to us for the VAT due. For more information on MTIC VAT fraud, see “MTIC Team” on the Intranet {HMRC – A-Z – Missing Trader Intra-Community (MTIC) Team (HMRC)}.Common features of this type of fraud are:<ul><li class="dash">little infrastructure required to start a business</li><li class="dash">rapid growth in tax throughput and turnover</li><li class="dash">high-value repayments claimed in early trading periods</li><li class="dash">off-the-shelf companies purchased from company formation agents (often identifiable by abstract title )</li><li class="dash">trade classes involving high value/low bulk goods, such as mobile phones or computer components. Fraudsters may attempt to deceive by giving misleading trade classifications</li><li class="dash">poor compliance, perhaps paying low value centrally issued assessments.</li></ul>There is a national strategy in place for dealing with Missing Trader Intra-Community VAT fraud. It involves initiatives such as pre-registration checks to deny VAT registration to bogus traders. Criminal Investigations Enforcement Strategy Unit is responsible for the MTIC VAT fraud strategy.(This content has been withheld because of exemptions in the Freedom of Information Act 2000)The DMB Tracing Group Cumbernauld will conduct in-depth tracing action on MTIC missing traders. Management of MTIC debt and related direct taxes debt where extended verification of a VAT return is ongoing is the responsibility of the MTIC Co-ordination Team, part of the High Risk and Complex Debt Unit. They will liaise with NTSCI and Solicitors Office and through the NTSCI have access to lawyers, insolvency professionals and forensic accountants to maximise the recovery of MTIC-related debts across all Heads of Duty, as well as using traditional DM methods to obtain payment/offset VAT credits against direct taxes debts.