A few of my CIS subbies approached me last year asking about reclaiming VAT. Since they're not VAT registered and didn't particularly want the hassle of registering & filing returns etc I pretty much told them to bugger off.
They however assured me many of their co-workers were doing it.
I've just been called by one of the same subbies (actually now management on the books). Apparently, the company that was paying him whilst self-employed (a payroll/umbrella type company) is forming LTD's for the lads, reclaiming historic VAT, then closing the company straight down.
Fraud surely?
Caller said they'd probably done in the region of 200 minimum so far, one chap's just had over £7k back!
Replies (11)
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How could the limited company reclaim any VAT when it has never had any expenses? surely it has got to be fraud?
Flat Rate VAT Savings
Could be a retrospective Flat Rate registration and claim? Certainly sounds very dodgy whatever the setup is.
FRS or not
How can a company "retrospectively" recover VAT on expenses that it has never incurred, in respect of a trade that it never intends to carry on?
In any event, how could FRS possibly achieve anything? FRS savings are obtained by invoicing the full amount of VAT but paying a smaller amount to HMRC - so they would need to retrospectively raise VAT invoices to their customers.
???
I was thinking along the same lines, BKD
How could they do a 'retrospective' VAT reclaim on a newly formed Ltd Co?
Not difficult
New co bills umbrella company for supply plus VAT. Umbrella recovers Input Tax and New Co disappears - oldest trick in the book and is Fraud. I was investigating this scam 20 years ago in HMRC. It is a weakness inn the VAT system hence why Gold and Telecoms etc have self supply provisions.
Hi
New co bills umbrella company for supply plus VAT. Umbrella recovers Input Tax and New Co disappears - oldest trick in the book and is Fraud. I was investigating this scam 20 years ago in HMRC. It is a weakness inn the VAT system hence why Gold and Telecoms etc have self supply provisions.
Clearly the Umbrella Company, part of the missing trader chain, will be co-liable for the missing VAT, would it not? The VAT only invoice would obviously be invalid.
Thanks, Shaun
I think you've confirmed what the rest of us were suggesting, that it is in fact quite difficult to achieve - legally.
in theory
HMRC would only know of the existence of this sham if the umbrella company was in a repayment situation which it generally will not be.
OBK
Have had dealings with a company called OBK running this FRS deal. Best avoided in my opinion.
Haha
Have had dealings with a company called OBK running this FRS deal. Best avoided in my opinion.
Do you mean the VAT man and CIS girl? Their website is ludicrous.