A VAT inspection occurs when the HMRC wishes to visit and inspect your VAT records to ensure that the correct amount was paid and that proper compliance measures are followed.
VAT fraud is a type of tax evasion. It happens when a business does not charge VAT when it should or charges you VAT but does not pay it to HMRC. In this article, you will get information about VAT Fraud Investigations, how long VAT fraud investigations last, and everything in detail.
Let’s Begin!
Understanding the Investigation
VAT fraud is a form of tax that occurs in many ways. It involves charging a customer who has committed fraud or crime.
VAT fraud is usually highly complex. If the person is under investigation for VAT fraud, you can contact specialist VAT fraud lawyers in the UK, who are highly experienced in advising clients facing fraud investigations.
They usually charge less than other VAT-registered traders for the same services because they always have a pricing advantage that helps to drive honest traders out of business and undermines the tax system.
This type of fraud involves goods imported VAT-free and sold at VAT-inclusive prices. At the start of the chain, the company disappears without paying HMRC when selling the goods.
They are also known as ‘missing traders’. The services are sold down a chain of companies known as ‘buffer’ companies which are used to disguise the paper trail of the fraud.
The final work in the chain is to export the goods which are free of VAT but reclaims the VAT it paid on its purchase hence the VAT repayment fraud.
If this were a legitimate purchase, then the reclaim of VAT would have been allowable. The same goods are often imported into the UK, and the process starts again. Hence, the term ‘carousel fraud’ or “missing trader VAT fraud” is due to the same goods going around repeatedly.
The Time Period
There is no absolute set limit on how long the HMRC can investigate. This means they will do so for as long as necessary to determine the required outcome.
Depending on how large and complex the business is, it can take anywhere from a few months to even a few years.
A visit to the business during the investigation may take anywhere from 1 to 4 days, depending on the structure and size of your organisation.
Once the inspection ends, the inspector may request further information or queries, which you will usually be given 30 days to respond to.
The HMRC will usually call and arrange the investigation in advance, typically seven days prior, but they may also do so without any warning.
The length of the investigation can be based on its nature and findings. If no mistakes are found during the inspection, then an immediate conclusion of the investigation may take place.
However, if errors are caused by negligence or oversight, the investigation length will likely increase proportionally to their findings.
If an error indicates deliberate tax evasion, then an investigation will take place that will focus on investigating all business tax affairs.
Conclusion
For more minor cases, 3-6 months would be a fair average, rising to about 18 months for more protracted investigations.
As you went through the article, you learned about VAT Fraud Investigation, which is a Behaviour Contrary to the Provisions of Law Other than VAT Law.
The main aim behind introducing the VAT Fraud Investigation is to raise a business that dishonestly fails to charge for the VAT. Also, it is a behaviour in breach of certain specific VAT rules, which could lead to the danger of the VAT system of any country.