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Where Taxpayers and Advisers Meet

Question about a suspected VAT scam

Joined:Thu Oct 24, 2019 8:59 pm
Question about a suspected VAT scam

Postby JTDUK » Thu Oct 24, 2019 9:06 pm

Hi all,

I am hoping someone can clear something up for me. A friend of mine has his own business and a while ago discovered that he could legally claim back VAT for business purchases even though they were made a few years ago. He got a good chunk of money back.

However, since then he seems to have spent this amount and then some. He has hinted at having some kind of scam going and I am convinced he is not above board.

My question is this: what is to stop a business owner from buying some expensive equipment from a shop, claiming a VAT refund, then returning that item for a full refund from the shop. Including the VAT that they originally paid?

Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire

Re: Question about a suspected VAT scam

Postby jerome.lane » Fri Oct 25, 2019 8:50 am

The VAT repaid on returned goods should reduce the VAT expense claim. It's difficult for HMRC to police but anyone looking at a set of accounts for a business with VAT reclaims on assets it doesn't own should be asking awkward questions of that business owner.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

Joined:Thu Oct 24, 2019 8:59 pm

Re: Question about a suspected VAT scam

Postby JTDUK » Sat Oct 26, 2019 4:35 am

Thanks very much for the response.

It's not my business really, I am just convinced that he has a scam on the go and I want to figure out what it is so I can take the moral high ground. I'm certain it has something to do with VAT. He is a sole trader and buys expensive equipment for work. I think he is buying it, claiming VAT back before the refund timeframe ends, then just returning the kit to the store he bought it from for a full refund.

I'm not sure if that's even possible as an ongoing scam - especially as the amount he must be doing would tally in any way with his declared income!

Joined:Wed Feb 08, 2017 2:33 pm

Re: Question about a suspected VAT scam

Postby AnthonyR » Fri Nov 08, 2019 11:29 am

If he is returning the goods and not including the returns on the VAT return (and paying back the VAT reclaimed) then he's committing tax fraud.

If you really want to do something about it you can report it to HMRC:

However, I'm not sure how long your friendship would last if they worked it out!
Anthony Rogers LLB CTA TEP
Fusion Partners LLP

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