HMRC Cracks Down on VAT Fraud with New Senior Specialist Role

HM Revenue and Customs (HMRC), the UK's tax payments and customs authority, is stepping up its efforts to combat VAT fraud by hiring a Senior Indirect Tax Specialist for its Large Business (LB) directorate. The LB directorate is responsible for over 2,000 of the largest businesses in the UK, bringing in more than £9 billion in compliance yield annually.

The new role will involve leading high-risk and sensitive VAT interventions, coordinating and supporting cases worked by other VAT specialists, and providing technical leadership across the regional VAT community. HMRC is seeking a motivated indirect tax expert who thrives in technical environments, can challenge tax risks, and is a subject matter expert on wider tax and commercial issues in the finance sector.

The crackdown on VAT fraud comes amid several key developments related to VAT and tax policies in the UK. HMRC has confirmed that UK VAT and excise legislation will continue to be interpreted in line with EU VAT law even three years after Brexit. The UK Treasury is also seeking views on a proposed Carbon Border Adjustment Mechanism (CBAM), a levy on certain carbon-heavy goods being imported into the UK, to be implemented in 2027.

HMRC is working with marketplaces to identify foreign e-commerce traders who have established virtual UK companies in an attempt to avoid VAT registration obligations, with an estimated 10,000 businesses being approached. The agency has also confirmed that there will be no change to the EU-Northern Ireland Intrastat reporting threshold in 2024.

In a related development, the Financial Police of Cremona, in collaboration with other provincial commands, is executing an order of precautionary measures and preventive seizure against 24 companies and 12 individuals suspected of being part of a criminal association involved in a complex VAT fraud scheme. The investigation revealed that the group, led by a building contractor from Rudiano, operated through a network of companies with fake addresses and 'front men' to issue invoices for non-existent transactions, evade taxes, and launder the illicit proceeds.

HMRC is set to publish a response to its consultation on umbrella company non-compliance, as well as new guidance and a 'checking tool' for workers. The government remains concerned about the scale of non-compliance in the umbrella company market and is considering introducing a statutory due diligence regime for businesses that use umbrella companies.

Why this matters: The crackdown on VAT fraud and the introduction of new measures to combat non-compliance in the umbrella company market highlight the UK government's ongoing efforts to ensure a fair and transparent tax system. These developments have significant implications for businesses operating in the UK, as well as for workers employed through umbrella companies.

The hiring of a Senior Indirect Tax Specialist by HMRC underscores the agency's commitment to tackling VAT fraud and ensuring compliance among large businesses. As the UK navigates the post-Brexit landscape and implements new tax policies, such as the proposed Carbon Border Adjustment Mechanism, businesses will need to stay informed and adapt to the changing regulatory environment. The ongoing investigations into complex VAT fraud schemes, such as the one uncovered by the Financial Police of Cremona, serve as a reminder of the importance of maintaining robust compliance measures and due diligence processes.

Key Takeaways

• HMRC hiring Senior Indirect Tax Specialist to combat £9B VAT fraud in large businesses.
• UK to maintain EU VAT law interpretation post-Brexit, considering Carbon Border Adjustment Mechanism.
• HMRC cracking down on foreign e-commerce traders avoiding VAT, no change to EU-NI Intrastat threshold.
• Italy uncovers complex VAT fraud scheme involving fake companies and money laundering.
• HMRC to publish guidance and checking tool for workers on umbrella company non-compliance.