What more should I do on a possible VAT fraud

What more should I do on a possible VAT fraud

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A client called me the other day and mentioned that she had been charged VAT by an unregistered trader, her comment along the lines of "Small business, mistakenly charged VAT when not even registered". She clearly thought it was a mistake on the part of the supplier. I don't know who the supplier is or what the invoice was for, but I might find out when we get her books in for the year end.

This seems an unusual mistake and I wonder if I should suspect VAT fraud? If I do, then should I do more digging, e.g. ask the client who the supplier was.

It may all become clear when we look at the year end, but in the meantime I'd be interested in views on what more digging, if any, I should do.

Replies (7)

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By johngroganjga
22nd Apr 2015 09:35

As the client has contacted you about this, if I were you I would do a bit of digging now.

The first question that occurs to me is how does your client know that the supplier who has charged her VAT is not VAT registered?

Then I would advise the client that if she is ever charged VAT on an invoice without the supplier's VAT number on it, she should forthwith ask the supplier for a valid VAT invoice and decline to pay the VAT amount on the invoice until it is supplied.

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By Andrew Dunbar
22nd Apr 2015 09:45

Firstly you would definitely have to investigate the position further.The client should ask for a valid VAT invoice and if this was not forthcoming and she contacted you further you would have to consider the Money Laundering question and consider whether a report was submitted to SOCA

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David Winch
By David Winch
22nd Apr 2015 10:22

If it was me I probably would do a bit more digging - but then I'm like that!

Legally you have an obligation to make a report to the National Crime Agency (formerly SOCA) under s330 PoCA 2002 / MLR 2007 if you suspect (or have reasonable grounds to suspect) that somebody (not limited to your clients!) is engaged in 'money laundering' as a result of information which HAS COME TO YOU in the course of an activity in the 'regulated sector' - see s330(3) - (unless one of the exemptions applies).

Anybody who is engaged in VAT fraud will necessarily also be engaged in 'money laundering' as defined by s340.

But note that this does NOT require you to do any digging.  You are simply required to react to information which has come to you.

Of course if the VAT has been charged by genuine mistake (for example if the trader thinks that where he has paid VAT to his supplier he is obliged to show VAT on his invoice to his customer) then there is no dishonesty & no 'money laundering'.

Also of course you do not know the identity of the possible 'money launderer' & you might feel that in the circumstances you are exempted from reporting by s330(3A).

So IMHO there is some doubt as to whether you are obliged to report in this instance.

David

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By lme
22nd Apr 2015 10:35

Thanks, all, great advice

Really helpful opinions. We should get the year end work soon so we will have a look then. To answer Johngroganjga, she left a message saying "If someone has charged me VAT when I didn't realise the price was net, can I do anything to get it back if I am not VAT registered", I left her a message which included, amongst other points "speak to the supplier and explain your misunderstanding and see if they will help you with a discount .....", her message back to me was "All sorted, turns out this small company actually charged it by mistake!".

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chips_at_mattersey
By Les Howard
22nd Apr 2015 12:36

VAT incorrectly charged

I agree that you are not required to do detective work.

Whether you can reclaim the VAT, read HMRC Notice 48, ESC 3.9, which explains when VAT can still be reclaimed in this situation.

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Replying to Accountsforus:
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By lme
22nd Apr 2015 17:05

Thank you

Les

what a turn up thank yu so much

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By macaulay147
24th Apr 2015 12:41

Client not VAT registered

I think many of you have missed the fact  Ime's client is according to her second post not VAT registered. Therefore reclaiming the VAT is not possible.

I am unsure as to how a 'small business' would have charged VAT by mistake in the first place.

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