With the UK Fraud Gap reaching its highest peak since 2007, we have decided to delve further into the murky world of VAT Fraud, to give you the facts for 2013.
VAT Fraud is now so large, it is estimated that the gap is worth an additional 1% to the basic rate of tax, to each tax payer in Britain. The majority of the problem is down to VAT Evasion, False Accounting and Tax Relief Claims, although there are many other ways in which people are committing VAT Fraud.
A recent report from BDO, has said that the main type of VAT Fraud being committed in the UK, in 2013, is ‘Carousel Fraud’, also known as ‘Missing Trader Fraud’. This type of fraud sees a trader buy a large value, small item good, such as a smart phone, VAT free from Europe. A VAT registered company then sells them to unsuspecting customers adding 20 per cent VAT onto the selling price. Before the VAT can be collected by HMRC from the UK customers, the importing company is liquidated and its directors disappear (hence the name ‘Missing Trader’) leaving the VAT unpaid.
This is costing the Government colossal amounts of money and while HMRC are managing to reduce the figure, they are still writing off up to £1billion annually.
The figures below give you an idea of how much fraud is costing the UK economy, along with its percentage:
Types of Fraud – BDO figures*
- Tax fraud – £603m (44% of all fraud)
- Unauthorised use/misuse of assets – £209m (15% of all fraud)
- Counterfeiting – £207m (15% of all fraud)
- Mortgage fraud – £64m (5% of all fraud)
- Third party fraud – £62m (5% of all fraud)
- Money laundering – £60m (4% of all fraud)
- Employee fraud – £56m (4% of all fraud)
- Other (including Management, Breach of Regulations, non-corporate and corruption) – £111m (8% of all fraud)
However, the HMRC are fighting back. In the first week of January 2013, HMRC published the photographs of more than 30 of last year’s biggest tax cheats as part of a tax evasion campaign. Uploading the photographs to popular social network site, Flickr, they are hoping that it will shock potential VAT Fraudsters into not committing the crime; and with the individuals caught so far, being sentenced to a total of 155 years and 10 months combined behind bars as a result of their actions, they may do just that.
If you are concerned about the amount of VAT your business is paying, feel free to contact us on 01332 242257 or alternatively email us at firstname.lastname@example.org.