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HMRC internal manual

VAT Fraud

What to consider prior to determining whether to use an intervention: matters to consider when looking at particular types of taxable person or activity: box breaking and box consolidation: if you decide to deny input tax

Before making a submission to the VAT Fraud Team you should liaise with colleagues regarding direct tax (for example PAYE), benefits and credits. This will allow you to confirm whether the individuals of the box breaker or box consolidator used as runners were employees or not and whether those individuals were also claiming benefits and/or credits (see VATF36236). Your results should be set out in the submission.

If you then decide to deny input tax then, depending on whether you are in Specialist Investigations (SI) or Local Compliance (LC), you should follow the guidance below.

Officers in SI

You should make a submission (using a ‘VAT & IPT Technical Submission’ template (guidance can be found on the VAT Directorate intranet site)) to the Technical Team, who will then review the submission and pass it on to the VAT Fraud Team. The submission and template should be forwarded, via e-mail(This content has been withheld because of exemptions in the Freedom of Information Act 2000) , having first been signed off by your line manager. In addition to the information requested on the submission template it should also contain the following information:

  • Your EF code;
  • The amount of input tax being denied, VAT period(s) in which the input tax fall(s) and amount(s) being assessed (if any);
  • Background information about your trader and the purchases/sales, e.g.:

    • name(s) of director(s) and company secretary(ies),
    • number of employees (including whether those employees were used in purchasing the phones),
    • who purchased the phones (i.e. employees, family members etc),
    • where the phones were purchased from, when and how they were paid for (cash, credit card etc),
    • who the phones were sold to, when and how the customer(s) paid your trader,
    • the contractual relationship between your trader and it’s customer(s),
    • where the phones were kept (e.g. in a warehouse owned and operated by your trader, an unrelated entity, the customer(s) etc),
    • what other goods and services your trader has reclaimed input tax on in the relevant VAT period(s),
    • what due diligence was undertaken by your trader on its customer(s),
    • any other information you consider important/useful.
  • Why you are proposing to deny the input tax, e.g.:

    • the invoice is/invoices are invalid because … ,
    • what alternative documentary evidence was produced and your views of it,
    • what additional information you considered,
    • whether the person making the purchase acted as an undisclosed agent, setting out the evidence for this,
    • whether the person making the purchase was not an employee, setting out the evidence for this,
    • any other reason.

You must ensure that the submission is signed off by your line manager prior to sending it to the Technical Team. If it is received by the Technical Team without being signed off it will be returned.

Officers in LC

If you require advice you should a ‘VAT & IPT Technical Submission’ template. When completing the template please ensure that the additional information set out above for SI officers is also provided (where appropriate).