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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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.
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.
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.
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.
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.
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.
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.
Please clarify
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.
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...
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.