The BMRA has published VAT fraud guidance for members and industry stakeholders to better understand the issue.

The BMRA Guidance on joint and several liability for unpaid VAT and the supporting VAT Fraud 101 Cribsheet outline the various forms of the fraud in more detail and offer members a range of measures that they can take to reduce their exposure to an HMRC investigation, a time-consuming and costly process in itself.

In its simplest form, missing trader fraud occurs where one supplier in the chain goes ‘missing’, failing to account for the VAT owed to HMRC. When the fraud is uncovered, HMRC may withhold input VAT on the premise that all merchants in the supply chain ‘should have known’ that the missing trader intended to defraud the HMRC.

“ To many, this seems grossly unfair but is a reminder of the need to be alert to the fraud and to take sufficient steps to guard against it, starting with adequate ‘Know Your Customer’ checks, but also having regard to the price of goods relative to open market prices, and a raft of due diligence measures that we strongly advise members to implement,” said James Kelly, CEO of BMRA. 

The guidance also covers more complex forms of VAT fraud, such as ‘Missing Trader Intra-Community’ (Carousel) fraud and Contra Trading, involving import/export of goods and output/input tax offsetting.