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VAT: is late registration a money laundering offence?

VAT: is late registration a money laundering...

I have a client who, we now find, should have registered for VAT back in 2011.  He has never been self-employed before, was ignorant of the rules and simply did not realise he had to register.

He now wishes to bring himself up to date but has no available funds.  He expects to recover the VAT from his clients but we realise there could be substantial penalties, interest etc on top.

I am suggesting he register immediately and explain the whole situation to HMRC, asking for a time to pay arrangement, but do I need to submit a SAR to NCA in the interim?

This is understandably a very worrying situation for all involved.

Thanks for any answers.

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02nd Mar 2016 14:28

If the client is wishing to make amends and you are satisfied they did not deliberately avoid registration to dodge the tax then there's no need for the SAR.

If they have had the situation made clear to them and refuse to register despite now knowing unequivocally that they have an obligation to do so then you have an obligation to file the report.

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02nd Mar 2016 17:32

Knowledge / suspicion (not)

The most relevant section is s340(3)(b) Proceeds of Crime Act 2002.  In this case the alleged offender (i.e. the client) neither knew nor suspected that he was obliged to register for VAT & had failed to do so.  In consequence even if his failure to register was a criminal offence (which is open to debate) he was not committing a 'money laundering' offence.

It follows that there is no obligation to submit a Suspicious Activity Report to the NCA under s330.

As already noted, if now he does know about his obligations, he fails to register promptly & complete the outstanding VAT Returns (or otherwise notify HMRC of the VAT due) then you will be in a different situation.

David

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02nd Mar 2016 19:08

Thanks for your replies.

Most helpful.

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