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EnergyVAT fraud soars as recession tightens
Filed under: Scams & Fraud
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The fraud gap - now at its highest peak since 2007 - has become so large it's worth a whole 1p in tax to each taxpayer, claim experts. Much of this tax shortfall, about £3bn, is is down to VAT evasion, false accounting and tax relief claims says accountancy experts BDO.Yet the vast majority of fraud, public and private sector, is likely not reported at all.
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"Politicians and the public at large are presently pointing their finger at various multinationals for allegedly not paying the correct amount of corporation tax," says BDO's Simon Bevan."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."
Bevan estimates the UK VAT gap to be around £10bn in total with fraud accounting for approximately a third of this figure. That figure would likely cover the winter fuel allowance, all free TV licences and compensate pensioners on the pensions credit (£1.4bn) while still leave enough over to build 17 new hospitals (£1.9bn/£113m).
Suspicion
The vast proportion of this tax fraud is thought to be carousel or missing trader fraud. Carousel fraud is when a trader might buy high value small goods like smart phones VAT-free from Europe, before flogging them on, but claiming the VAT relief.Missing trader fraud is what it suggests: you flog goods to a third party, charge sales tax then close down the company, without paying any VAT liabilities or other taxes.
Although there was an overall drop in reported fraud between 2011 and 2012, that figure should be treated with suspicion says Bevan. "In the vast majority of cases the police do not have the resources necessary to investigate a number of large complex frauds in parallel."
"The consequence of this is that reported fraud figures reflect the ability and the capacity of both the police and the criminal justice system to process them rather than the actual number of frauds committed each year."
Types of Fraud - BDO figures
1) Tax fraud - £603m (44% of all fraud)
2) Unauthorised use/misuse of assets - £209m (15% of all fraud)
3) Counterfeiting - £207m (15% of all fraud)
4) Mortgage fraud - £64m (5% of all fraud)
5) Third party fraud - £62m (5% of all fraud)
6) Money laundering - £60m (4% of all fraud)
7) Employee fraud – £56m (4% of all fraud)
8) Other (including Management, Breach of Regulations, non-corporate and corruption) - £111m (8% of all fraud)
HMRC's biggest tax cheats of 2012
- Mohammed Shabir Karim and Kamran Bhatti<p> Jailed for evading over £4.5 million in VAT due on platinum trading.</p>
- Imran Bhatti and Raymond Bowden<p> Jailed for evading over £4.5 million in VAT due on platinum trading.</p>
- Operation Hazel Lamp<p> A gang which described over 20 million smuggled cigarettes on shipping documents as babies’ toys was jailed after a covert surveillance operation.</p> <p> Sentenced in 2012: Phillip William Robinson, Vincent Waller, Phillip William Hall, Christopher John Burns and Andrius Kochanauskas – 13 years 1 month</p>
- Operation Hazel Lamp<p> A gang which described over 20 million smuggled cigarettes on shipping documents as babies’ toys was jailed after a covert surveillance operation.</p> <p> Sentencing: Paul O’Meara, Robert Doran, Patrick Gray, Martin Cleland, Mark Sadgrove, Wayne Stock and Matthew Neale – 24 years 6 months</p>
- Operation Hazel Lamp<p> A gang which described over 20 million smuggled cigarettes on shipping documents as babies’ toys was jailed after a covert surveillance operation.</p> <p> Sentencing: Paul O’Meara, Robert Doran, Patrick Gray, Martin Cleland, Mark Sadgrove, Wayne Stock and Matthew Neale – 24 years 6 months</p>
- Vincent Walker and Phillip Robinson<p> Part of a criminal gang which set up a factory capable of making up to 625 million counterfeit cigarettes and five million pouches of fake hand rolling tobacco a year.</p>
- Christopher John Burns and Andrius Kochanauskas<p> Part of a criminal gang which set up a factory capable of making up to 625 million counterfeit cigarettes and five million pouches of fake hand rolling tobacco a year.</p>
- Phillip Hall<p> Part of a criminal gang which set up a factory capable of making up to 625 million counterfeit cigarettes and five million pouches of fake hand rolling tobacco a year.</p>
- Operation Tulipbox<p> The gang set up a chain of bogus companies to trade fraudulently in EU emissions allowances.</p> <p> Sentenced in 2012: Sandeep Singh Dosanjh, Navdeep Singh Gill and Ranjot Singh Chahal – 35 years</p>
- Navdeep Singh Gill<p> The gang set up a chain of bogus companies to trade fraudulently in EU emissions allowances.</p> <p> Sentenced in 2012: Sandeep Singh Dosanjh, Navdeep Singh Gill and Ranjot Singh Chahal – 35 years</p>
- Roy Faichney<p> Roy Faichney, Managing Director of Vantis Tax Ltd, was sentenced to four years for his part in a fraudulent tax avoidance scheme which left charities and Exchequer out of pocket.</p>
- Operation Inertia<p> The gang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.</p> <p> Sentenced in 2012: Lee Sellers, Mehmood Khan Nazir, Umar Khan Nazir and Marshall Boston – 10 years 6 months</p>
- Mehmood Khan Nazir<p> The gang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.</p> <p> Sentenced in 2012: Lee Sellers, Mehmood Khan Nazir, Umar Khan Nazir and Marshall Boston – 10 years 6 months</p> <p> HMRC</p>
- Umar Khan Nazir<p> The gang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.</p> <p> Sentenced in 2012: Lee Sellers, Mehmood Khan Nazir, Umar Khan Nazir and Marshall Boston – 10 years 6 monthsgang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.</p> <p> Sentenced in 2012: Lee Sellers, Mehmood Khan Nazir, Umar Khan Nazir and Marshall Boston – 10 years 6 monthse gang claimed to have sold four million mobile phones worth £1.7 billion. However, in many cases the phones did not exist. In an attempt to make the trade appear legitimate, over 5,700 fake business transactions were created to claim large amounts of VAT.</p> <p> Sentenced in 2012: Lee Sellers, Mehmood Khan Nazir, Umar Khan Nazir and Marshall Boston – 10 years 6 months</p> <p> </p> <p> Sentenced in 2012: Lee Sellers, Mehmood Khan Nazir, Umar Khan Nazir and Marshall Boston – 10 years 6 months</p>
- Operation Rust<p> A criminal gang has been jailed for one of the biggest ever alcohol smuggling frauds ever uncovered in the UK. The scam was worth £50m a year in unpaid duty and VAT.</p> <p> </p> <p> Sentenced in 2012: Kevin Ramon Burrage, Gary Dennis Clarke, Michael Brian Turner and Davinder Singh Dhaliwal – 21 years 3 months</p>
- Operation Rust<p> A criminal gang has been jailed for one of the biggest ever alcohol smuggling frauds ever uncovered in the UK. The scam was worth £50m a year in unpaid duty and VAT.</p> <p> </p> <p> Sentenced in 2012: Kevin Ramon Burrage, Gary Dennis Clarke, Michael Brian Turner and Davinder Singh Dhaliwal – 21 years 3 months</p>
