In a heated discussion, CRN Editor Sara Yirrell chats to three people passionate about the plight of IT and mobile phone traders caught up in HM Revenue and Customs (HMRC) Extended Verification process to combat VAT fraud.
Joining CRN in the studio is Anthony Elliot-Square, managing director of International Phone Traders, Dave Fisher, managing director of Silicon8 (who is waiting for a significant VAT payment back from HMRC) and John Champion, partner at Mclein Reid accountants and auditors.
Hear how traders such as Dave are fighting against the tide to get their money back and are being caught up in lengthy and costly legal battles with the government.
We also feature a statement from HMRC (who couldn't attend filming) on the issue to keep it balanced.
Due to popular demand - here is the HMRC statement in full:
"MTIC VAT fraud is an organised criminal attack on the VAT system with the aim of stealing revenue which is needed to fund essential public services.
All VAT repayment claims received by HMRC are subject to checking to varying degrees - Extended verification is a key element off HMRC’s strategy to tackle Missing Trader Intra-Community (MTIC) VAT fraud. Selection for verification is risk based and underpinned by intelligence targeting specific trading behaviour and not specific commodities.
Where a trade sector is seriously affected by fraud (which was the case for mobile phones), HMRC will carry out further and extended checks to verify the often very large claims for repayment of VAT – indeed HMRC is duty bound to do so
Inevitably these extended checks will take time – however in most cases the Courts have recognised this and have supported the need for the extended verification of repayment claims as part of HMRC’s efforts to tackle this fraud particularly given that the vast majority of transactions subjected to extended verification have been found to be connected with fraud.
The Court of Appeal recently confirmed that HMRC can continue to apply the test without the need for implementing UK legislation. HMRC will continue to deny input tax claims where it is found that the transactions are connected with the fraudulent evasion of VAT and that the trader knew or should have known of this.
HMRC does not “trap” traders – it is for businesses themselves to decide how they trade and to be aware of the tax consequences that flow from that. HMRC is committed to working with all interested parties to seek solutions to tackle this fraud. In an effort to increase awareness, HMRC issued a public notice as far back as 2006 to help businesses to spot MTIC fraud.
Extended verification is a labour-intensive and often lengthy procedure and not one that HMRC undertakes lightly. If a trader is uncertain about any business relationship then they should carry out the appropriate level of risk management checks.
HMRC will continue to deny input tax claims where it is found that the transactions are connected with the fraudulent evasion of VAT and that the trader knew or should have known of this."