VAT Estimated Figures

VAT Estimated Figures

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Hello Everyone

I like to ask a question. What is legal implication of "VAT Estimated Values"?

A business placed its application for VAT registration and the management mentioned estimated turnover for next 12 months about £300,000/- Their application was accepted and they were granted VAT registration number.

However, due to some reasons, they were unable to reach the estimated figure. Their turnover is about £50,000/-. The management of that business were told their previous accountant that they mention the figure of £300,000/- and did not reached even half. HMRC will consider this as fraud and may start investigation about your company's business.

Can anyone please tell me, is this true statement?

Can HMRC suspect fraud just because their estimated turnover is much less than what they mentioned on their application?

That company is doing business as normal and the management is doing their best to increase their business. 

Replies (14)

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By DMGbus
16th Jun 2014 08:43

Nom problem

Anticipated turnover is quite often, especially for a new business, a "figure plucked from the air" and of no consequence (in the registration process) unless the directors/proprietors have a tarnished background from a VAT viewpoint.

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By johngroganjga
16th Jun 2014 08:44

All that the above means is that the business has been paying VAT unnecessarily.

There is nothing for HMRC to investigate providing the business has been competing and submitting accurate and complete VAT returns.

I am not sure why the word "fraud" is mentioned.  Even if the figure of £300,000 was dishonestly exaggerated the business would not have obtained any disadvantage from its dishonesty - on the contrary it has shot itself in the foot.

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Replying to Wilson Philips:
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By Abutalib
16th Jun 2014 10:15

The point from HMRC is that they believe the figure of £300,000/- was mentioned to commit fraud but they did not come with any proof of fraud. 

Is this right action from HMRC's officers?

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By User deleted
16th Jun 2014 10:27

Please clarify ...

... have HMRC actually said that they suspect fraud? If so, ask them to clarify exactly what fraud they think has been committed. I could understand it if they were perhaps suspicious that sales have been understated in view of the previous estimate. But that is an entirely different matter. I'd be quite interested to hear HMRC's line of thinking on this one.

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Replying to Matrix:
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By Abutalib
17th Jun 2014 00:21

HMRC Wordings

The wordings which HMRC stated that "they think the figure of £300,000/- was fraud" but no other reason was provided. The officer who has spoken with the owner of business said that she believe that this is fraud but she failed to provide any proof about fraud at all.

She was unable to provide proof because there was no fraud actually took place nor owners has any plan to commit any kind fraud. 

Just because HMRC officer think this is fraud, how this statement could be justified?

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Locutus of Borg
By Locutus
16th Jun 2014 11:29

What fraud?
Fraud is where someone has deliberately lied to obtain a financial advantage.

From what the OP has explained I see neither the deliberate lie or the financial advantage.

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RLI
By lionofludesch
16th Jun 2014 11:35

Have to agree

This talk of fraud is absolute nonsense.  You don't have to achieve a certain level of turnover to register for VAT.  They just want to know whether you're Tesco's or the corner shop.

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By Paul Soper
17th Jun 2014 10:01

Dummy companies set up as part of missing trader frauds?

The level of Missing Trader Fraud continues apace with ever more esoteric items being used, from the mobile phone it has moved on to power supplies I believe... however most of these frauds can only work using a company set up for the purpose and what better than to acquire an existing company which has no suspicion attaching to it - the more genuine it looks, the better.  So it could be that the accountants are suggesting that establishing a company, claiming to have much more turnover than actually realised might raise HMRC suspicions if there is then a substantial reclaim of VAT made.  If everything is genuine there is, of course, no fraud, but such a company might find that it is being investigated inside and out as a possible target.

The alternative is the old chestnut about concealing turnover to reduce liability and again HMRC might wonder where the £250,000 disappeared to.  As long as there is evidence there should be no problem there either.

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Replying to Wilson Philips:
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By Abutalib
17th Jun 2014 11:38

Your Point is Valid .... But

You have made a valid point but there is some thing which I have mentioned which need to be addressed.

The company has not commit any kind fraud. They did not made any sort of VAT claim. The wording of HMRC officers is "We think this is fraud" and hence we will prosecute you on this. We will charge you this.

The point which I am not able to understand is that "how someone could get charged / prosecuted basis of hmrc officer's thinking" when actually, he has not commit any fraud nor he has any intention to commit fraud? 

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RLI
By lionofludesch
18th Jun 2014 10:49

I agree

.....and all you can do is ask the HMRC officers to back up their assertions.  Why do they think it is fraud ?

This is desk top monitoring at its worst.

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Replying to Justin Bryant:
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By Abutalib
18th Jun 2014 10:46

Reply to Bail

After I made this post, my client has a visit from HMRC officers and they said the thing which I have wrote.

My client has never involved in any kind of money laundering matters nor its trade involve such kind activities. His trade is book publications and advertising. His book publications side of business did not started and this was reason why his turnover is not up to the mark.

As I said before, He has not made any single claim of VAT refund.

HMRC officers did not come with any proof about kind kind fraud with this business. They keep insisting that we think this is fraud but there was no documented proof with them.

My question is still there, how can HMRC officers think of fraud when there is no proof and its just basis of estimated figure which was mentioned in VAT registration application which goes wrong.

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Replying to nmprobinson:
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By User deleted
18th Jun 2014 10:51

Please clarify

Abutalib wrote:

They keep insisting that we think this is fraud

Exactly what are they saying is fraud? (ie what do they mean by "this"?) As Basil said, unless and until you can provide more substance, vague comments such as yours above are of no help at all.

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By Paul Soper
17th Jun 2014 13:16

Come clean...?

So, has this company made a substantial repayment claim for VAT which HMRC are resisting?  Your original post does not really explain enough about the background and we are all floundering around trying to be helpful but something must have triggered this response from HMRC and a sudden high value transaction with a substantial VAT repayment looks favourite to me.  So help us out with a bit more detail about what is really going on...

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RLI
By lionofludesch
18th Jun 2014 10:54

Proof

Obviously, it's possible to "think of" fraud without proof. Proof comes later, after investigation.

Equally obviously, no one on here can help you counter these arguments - or, indeed, make any sensible comments which are not purely speculative - unless HMRC are good enough to say what their allegations actually are. 

Which, in my humble opinion, they should do.  From the outset.

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