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HMRC wins critical VAT fraud case

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5th Jun 2015
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HMRC said it won a case about VAT fraud which will save about £260m of taxpayers’ money.

The Supreme Court refused Fonecomp Ltd permission to appeal. The Fonecomp case involved a relatively small sum – £184,000 – but around 60 cases involving up to £260m in VAT rest on this case, HMRC said.

This case involved a type of 'missing trader intra-community' fraud, which involves a bogus trade between two companies.The first trader charges VAT but disappears without paying the VAT to HMRC. The second trader then reclaims the VAT.

HMRC said that the Fonecomp case involved a type of MTIC fraud known as contra-trading; "creating an apparently ‘clean’ chain of transactions to hide the fraud, which is in a connected ‘dirty’ transaction chain."

The company had been involved in trading mobile phones and claimed a VAT refund, HMRC said. HMRC refused on the grounds that the company should have known its trading was connected with MTIC fraud.

The Court of Appeal upheld previous rulings that HMRC was correct in using the so-called 'knowledge test' in contra-trading cases.

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By redboam
07th Jun 2015 13:41

Goldman Sachs?

A welcome result in the Supreme Court for tax payers but the question arises - Why were Goldman Sachs not pursued for what were perceived to be wrongful evasion of VAT in the same way?

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