VAT reclaim with no intention to trade

VAT reclaim with no intention to trade

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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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By B and Co
10th Feb 2015 11:49

How could the limited company reclaim any VAT when it has never had any expenses? surely it has got to be fraud?

 

 

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By stratty
10th Feb 2015 11:51

Flat Rate VAT Savings

Could be a retrospective Flat Rate registration and claim?  Certainly sounds very dodgy whatever the setup is.

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Replying to johnjenkins:
By Howard Marks
10th Feb 2015 12:10

FRS

stratty wrote:

Could be a retrospective Flat Rate registration and claim?  Certainly sounds very dodgy whatever the setup is.

 

I think this could be the road they're going down.

 

Caller had an old LTD he's never used and has just queried whether I ever registered him for VAT or more specifically FRS.

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By User deleted
10th Feb 2015 12:50

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.

???

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By ShirleyM
10th Feb 2015 12:44

I was thinking along the same lines, BKD

How could they do a 'retrospective' VAT reclaim on a newly formed Ltd Co?

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By shaun king
10th Feb 2015 18:22

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.

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Replying to The Dullard:
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By LuKosro
10th Feb 2015 19:32

Hi

shaun king wrote:

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. 

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By User deleted
10th Feb 2015 18:26

Thanks, Shaun

I think you've confirmed what the rest of us were suggesting, that it is in fact quite difficult to achieve - legally.

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By shaun king
10th Feb 2015 22:57

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.

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By stratty
11th Feb 2015 08:42

OBK

Have had dealings with a company called OBK running this FRS deal.  Best avoided in my opinion.

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Replying to Duggimon:
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By LuKosro
11th Feb 2015 23:16

Haha

stratty wrote:

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. 

http://www.obk-llp.com/Introducers/Introducers.aspx

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