This part of GOV.UK is being rebuilt – find out what beta means

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: creative industries tax reliefs: VAT risks / fraud: testing credibility

Once you have fully documented how the taxable person runs his business (VATF36431) you need to test the credibility of what you have been told and what you see.

The creative industries produce many unique documents specific to themselves which will be useful in testing the credibility of the business. For example:

  • scripts, series bibles, treatments & synopses,
  • shooting schedules,
  • storyboards,
  • production schedules,
  • chain of title documents,
  • legal agreements for writers, directors etc,
  • full budget/final cost report,
  • a DVD copy of the final product,
  • audit report at the final certification stage.

The above list is not exhaustive.

As well as the above the company should also have:

  • documents showing how the film, animation, game or high-end television series is to be funded,
  • an interim or final certificate (see VATF36422),
  • a copy of the statutory declaration (see VATF36422),
  • in some cases, an accountant’s report that accompanies the application for a final certificate,
  • PAYE records (for those employees in the SPV),
  • contracts (between the company and its suppliers, actors / directors, outsourcers etc), and
  • invoices (from accountants, solicitors, tax advisors, suppliers etc).

Again, the above list is not exhaustive.

When studying the documents you will need to ensure that what you are seeing corresponds with what you have been told and what you know of that particular industry. For example, if you are told that a company is going to produce a twelve part children’s animation series at a cost of £200m, but see documents that put the figure at £20,000 you would be correct in suspecting that this is not credible.

Where you do suspect the credibility of the business you should follow the guidance set out in VATF84000 and VATF36450.

Further guidance can be found at VATF33000.