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: frauds you might encounter
A person might obtain a VAT registration number as an intending trader, and may even have an interim certificate, but does not intend to develop or produce the finished product.
It is important to establish entitlement to be registered as an intending trader. Further guidance can be found in V1-28: Registration.
Missing Trader fraud, as the name suggests, involves one or more taxable persons in a chain of transactions going missing without declaring or paying any VAT. Sometimes the missing trader can be an associated company that sold directly to the customer (possibly with a common director), and in other cases it can sit further along in the chain. In the context of Missing Trader fraud the term ‘Missing Trader’ also includes taxable persons who deliberately accrue a VAT liability with no intention of paying it, even if they do not in fact go ‘missing’.
Missing Trader Intra-Community (MTIC) fraud (VATF23300) is a type of missing trader fraud.
A ‘sham’ can include:
- a transaction where invoices have been raised for goods or services that have not been, nor were ever going to be supplied / received;
- the finished product not being what the proposal and budget stated it was going to be;
- companies that were set up with the sole purpose of defrauding the revenue;
- no substance at all to the production.
Value of supply overstated
A supplier might deliberately over state the value of the supply so that the customer can make an inflated claim for input tax. This overstatement could turn a payment VAT return into a repayment VAT return, as well as inflating any claim for tax relief.
See also FPC80040 and FPC80050.
A taxable person might create tax invoices with the sole intention of making a claim for VAT, even though no supply has ever been received.