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HMRC internal manual

VAT Fraud

HM Revenue & Customs
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Basic interventions: other interventions: refusing VAT registration and deregistering a taxable person

HMRC can, in limited circumstances, either refuse to allow a taxable person to register for VAT or deregister a taxable person from VAT where we have objective evidence that leads us to believe that:

  • he is committing VAT fraud, or
  • he is part of a scheme to commit a VAT fraud, or
  • his transactions are connected with fraudulent evasion of VAT, or
  • his aim in registering for VAT is to be part of a scheme to commit VAT fraud, or to commit VAT fraud.

The essential element here is that there must be, or likely to be VAT fraud. Non-compliance, such as a failure to render VAT returns, does not amount to fraud unless there is evidence to show that the non-compliance is part of a VAT fraud or is seeking to mask a VAT fraud.

In the following instances you must contact the VAT Fraud Team to seek further guidance:

  • where the defaulting taxable person has also undertaken legitimate commercial transactions untainted by fraud; and
  • where the taxable person you are seeking to deregister is not a defaulter/missing trader (VATF53200), but is involved in transactions connected with fraud (VATF53100).

Where a taxable person, who is involved in MTIC fraud (VATF23500), has solely made taxable supplies and fraudulently defaulted on his VAT liability, there is no need to contact the VAT Fraud Team prior to deregistration. Instead a Regulation 25 letter should be sent to the taxable person, and if the taxable person is unable or unwilling to comply with their VAT obligations then they should be deregistered. Please see MTOG3700 of the Missing Trader Intra-Community Fraud Specialist Investigations Operational Guidance on issuing a Regulation 25 Direction.

In all other instances you must contact the VAT Fraud Team before taking action. There is a specific template that must be used which can be found at VATF85300.

If a taxable person appeals a decision to deny registration or to deregister the VAT Fraud Team must be informed at the earliest opportunity. For cases of simple non-compliance, e.g. non-production of records or failure to render VAT returns, you should consider another intervention, such as denying input tax (VATF42000) or the issue of a Notice of Requirement to pay security (VATF44600).