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HMRC internal manual

VAT Fraud

What is VAT fraud?: examples of different types of VAT fraud: manipulation of liabilities and accounting schemes: liabilities

VAT is charged at the standard rate on all supplies of goods and services unless they fall specifically within the VAT Act 1994, Schedule 7A (reduced rate), Schedule 8 (zero rate) or Schedule 9 (exempt). A taxable person making a supply for VAT purposes can reclaim his input tax, except generally (but subject to certain rules) for services falling within Schedule 9. It is therefore tempting for some taxable persons to deliberately:

  • mis-describe the supply by them so that it would attract a lower rate of VAT; and/or
  • collude with the supplier to mis-describe the supply so that it attracts a higher rate of VAT.

V1-07: Liabilities looks at the various goods and services that would fall within Schedules 7A, 8 and 9.

If you discover a taxable person who you suspect to be manipulating liabilities you should contact the VAT Fraud Team.