Missing Trader VAT Fraud
HMRC issued a Brief in September to announce that the implementation of the Domestic Reverse Charge (DRC) for Construction Services has been postponed by 12 months, until 1st October 2020. Whilst this may have come as good news to those businesses affected, there is an important consequence of the delay that these businesses should also be aware of.
In the intervening year, HMRC remain committed to tackling fraud within the sector and have put in place a robust compliance strategy using “tried and tested compliance tools”. The additional resource now made available to HMRC due to the DRC postponement will be used to focus on identifying and addressing existing perpetrators of fraud within the construction industry.
As a result, we are advising affected clients to consider and review their position in terms of their potential involvement in ‘missing trader fraud’. If investigated by HMRC, VAT registered businesses must be able to demonstrate that they have taken reasonable care and have not, in any way, been involved in fraudulent activity, be it directly or several transactions down the supply chain. The types of checks a business can undertake to help ensure the integrity of its supply chain include:
- Checking the legitimacy of customers or suppliers, which may include considering:
- What is your customer’s/supplier’s history in the trade?
- Are high value deals being offered with no formal contractual arrangements?
- Have you been contacted within a short space of time by a prospective buyer and seller offering to buy/sell goods of the same specifications and quantity?
- Checking the viability of the goods as described by your supplier, which may include considering:
- Can you be sure the goods exist in the quantity and specification being offered?
- Are they in good condition and not damaged?
- What recourse is there if the goods are not as described?
These are just a few examples of a long list of checks suggested by HMRC, further information of which can be found in their “How to spot missing trader VAT fraud” document here.
For further information, or to discuss how your business is affected and can protect its position during this intervening year, please contact a member of the Centurion VAT team at firstname.lastname@example.org