Tax fraud accounts for nearly half (44%) of all fraud reported in the UK, according to new research from BDO LLP, the accountancy and business advisory firm. This is the highest level since 2007.
BDO FraudTrack, which looks at all reported fraud cases over £50,000, found that while total fraud in 2012 fell by a third from £2.1bn to £1.37bn, tax fraud in 2012 fell only slightly over the same period. Totalling £603m, tax fraud is roughly double the amount in 2009 (£274m) and 2010 (£309m). Moreover, BDO believes that the vast majority of public and private sector fraud is not reported.
“Politicians and the public at large are presently pointing their finger at various multinationals for allegedly not paying the correct amount of corporation tax,” said report author Simon Bevan of BDO. “However, our latest survey of UK fraud shows that, in reality, it is the fraud element of UK’s VAT gap - the theoretical difference between what the Government expects to collect in sales tax and what it actually collects - that is the bigger drain on the public purse”.
The current UK VAT gap is around £10bn, with fraud accounting for approximately one third of this figure (£3.3bn).
BDO believes that approximately half of the £3.3bn figure relates to general non-compliance due to mistake or deliberate act by legitimate traders, whilst half is produced by a relatively smaller number of professional fraudsters committing missing trader fraud and carousel fraud.
Missing trader fraud occurs when an individual sells goods to a third party, charges sales tax and then either disappears or deliberately takes their company into administration before paying over their VAT liabilities.
Carousel fraud occurs when an individual buys goods from another member state without paying sales tax; they then move the goods through a number of companies (the carousel) before eventually exporting the goods to the original seller. At the point of export they claim their VAT refund (20%) from HMRC. The goods in question can go round the carousel many times leading to large losses to the revenue. Sometimes the goods in question physically move and sometimes they only appear to move through the use of false paperwork.
According to the FraudTrack figures, VAT fraud accounts for 41% of the total UK fraud figure.
For VAT fraud legal advice, please contact our fraud lawyers in London on 020 7387 2032.
