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VAT Fraud Solicitors

Being investigated for VAT fraud can be very stressful. If your business has been accused of committing VAT fraud, it is vital that you seek legal advice from VAT fraud solicitors, as soon as possible.

VAT fraud investigations can not only disrupt your business activities, but could also put your business’ reputation at risk. The lengthy and complex nature of VAT fraud investigations means that seeking advice from a legal professional, with knowledge and expertise in this area of law, is vital.

Complex issues

VAT fraud investigations often include large amounts of complex paperwork and having an expert on your side, who can advise and guide you through the process, is invaluable.

Worst scenario

The maximum sentence for VAT fraud is 7 years in prison and an unlimited fine.

What is VAT fraud?

Put simply, VAT fraud occurs when a company either does not pay the right amount of VAT to HMRC or does not charge the right amount of VAT to its customers. VAT fraud is a form of tax evasion. It is an offence which can have serious consequences.

In reality, VAT fraud is an extremely complex area of law and the rules surrounding it can often be difficult to understand, even for the most experienced business owner. As a result, if you are being investigated for VAT fraud, you should seek legal advice from an expert in this area of law as soon as possible.

What is the law on VAT fraud?

VAT fraud proceedings are usually brought under Section 72 of the Value Added Tax Act 1994.

This states that:

“If any person is knowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion of VAT by him or any other person, he shall be liable—

  1. on summary conviction, to a penalty of [the statutory maximum] [£20,000] or of three times the amount of the VAT, whichever is the greater, or to imprisonment for a term not exceeding 6 months or to both; or
  2. on conviction on indictment, to a penalty of any amount or to imprisonment for a term not exceeding 7 years or to both.”

A criminal offence which is triable summarily is only triable in a Magistrates’ Court. A trial on indictment is a trial in a Crown Court.

Some VAT fraud cases are brought under the Fraud Act 2006.

What are examples of VAT fraud?

VAT Fraud can be committed in many different ways. Common examples of VAT fraud include:

Cash VAT fraud – this is probably the most well-known type of VAT fraud, as it involves a business taking payments for its goods/services in cash and not charging their customer VAT

Carousel fraud or Missing Trader fraud – goods are imported without VAT and then sold on with VAT in the UK. The fraudster then disappears without paying the VAT to HMRC.

Falsifying invoices – invoices are made up to make it look like VAT was paid

Charging VAT without being VAT registered – the fraudster charges VAT to their customers and then does not pay the VAT to HMRC

Not registering for VAT – business owners, as well as sole traders who earn over £85,000 per year, do not register for VAT when they are supposed to

Using a VAT number that belongs to someone else – if a business uses another business’ VAT number, this would amount to VAT fraud

What is the sentence for VAT fraud?

The maximum sentence for VAT fraud is 7 years in prison and an unlimited fine.

However, in reality, most of the time HMRC will use civil, rather than criminal, penalties. This does not mean that the penalty for VAT fraud is not serious.

Civil penalties for VAT fraud include:

  • Fines (for the business and also personally for company directors)
  • Publicly naming those who fail to pay fines over £25,000
  • Disqualifying company directors
  • Making if very difficult for the company to continue trading

A VAT fraud solicitor has the skills and expertise necessary to ensure every piece of evidence against you is scrutinised and that your interests are protected during an HMRC VAT fraud investigation.

How do the courts decide on a sentence for VAT fraud?

If your VAT fraud case goes to court and you are convicted of VAT fraud, the judge will decide your sentence by looking at factors including how much you defrauded HMRC and your level of culpability.

As an example, a very minor case of VAT fraud could result in a sentence of community service, whereas a more serious case of VAT fraud could result in a prison sentence of more than 5 years.

The court will determine the culpability of an offender by weighing up all of the factors of the case in order to determine the role of the offender and the sophistication of the offence/the level of planning involved.

A high level of culpability could be demonstrated by various factors, including:

  • The offender played a leading role (where a group is involved)
  • The offender pressured others to become involved
  • There was a large number of victims

A medium level of culpability could be demonstrated by factors such as:

  • The offender played a significant role (where a group is involved)

A lesser level of culpability could be demonstrated by factors such as:

  • The offender was not motivated by personal gain
  • The offender had a peripheral role in the organised fraud
  • The offender had limited awareness of the extent of the fraudulent activity

When it comes to sentencing, the court will also consider the level of remorse shown by the offender.

What are the mitigating factors for VAT fraud?

Mitigating factors are aspects of a case which could reduce a sentence for VAT fraud. These include:

  • The offender does not have any pervious convictions
  • The offender is mentally ill or disabled
  • The offender was of previous good character
  • The offender has shown a significant level of remorse about their actions

Why do I need specialist VAT fraud solicitors?

VAT fraud solicitors have all of the knowledge and experience necessary to defend VAT fraud allegations. VAT fraud investigations often include large amounts of complex paperwork and having an expert on your side, who can advise and guide you through the process, is invaluable.

VAT fraud proceedings are normally lengthy and far reaching, with both individuals and businesses being inspected by HMRC. Being found guilty of VAT fraud can result in a prison sentence and confiscation under the Proceeds of Crime Act. Having an experienced VAT fraud solicitor on your side, from the start, can make a real difference to the outcome of your case.

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