Updated HMRC guidance on MTIC fraud

Wed 09 May 2018

HMRC has recently updated its guidance on how to spot MTIC (missing trader intra-community) VAT fraud.  This guidance may be helpful to any client who is VAT registered, particularly those dealing with buying or selling of high value goods.

It is important for businesses to adopt the right procedures with respect to their VAT transactions and administration, as involvement with VAT fraud can be a serious matter.

• HMRC may deny the ability to reclaim input VAT
• The Criminal Finances Act 2017 identifies that a ‘relevant body’, such as a company or partnership, can commit a criminal offence if it does not have reasonable procedures for prevention of tax evasion offences.
• There is also a new penalties for ‘participation’ in VAT fraud which can result in:
  • A fixed 30% penalty for businesses that know or “should have known” they have been involved in VAT fraud;
  • The prospect of personal liability for all or part of that penalty for trustees or company officers;
  • Reputational risk for both the organisation, its trustees and its company officers, with the potential to be “named and shamed” by HMRC.

The HMRC guidance sets out some information on how businesses can reasonably demonstrate that they have properly considered who they deal with and whether their supply chains, customers and suppliers are credible and legitimate from a VAT perspective. Procedures (which will need to be evidenced) could include:

• Checks on the integrity of the supply chain;
• Specific checks on those involved in the supply chain (which may need to be tailored to the business) such as obtaining copies of VAT registration certificates and certificates of incorporation, undertaking credit checks, retaining relevant transaction documentation.

For further advice and information on appropriate procedures please get in touch with the Mazars VAT team.