What is Missing Trader Intra Community (MTIC) Fraud?
In very simple terms high value/low volume goods such as computer chips and mobile phones are imported into the UK and the importer doesn’t have to pay any VAT at the time of importation. The goods are sold on through a series of companies with VAT added on to the price at each stage. The goods are then exported again to a customer in another EU member state or outside of the EU and the sale is zero rated. Typically the original importer or first company in the chain goes ‘missing’ without paying the VAT. Sometimes the ‘missing trader’ has hi-jacked the identity of a legitimate company. Often the goods are imported from one Member State and re-exported with the whole process being repeated many times using the same goods and this has led to the fraud also being referred to as ‘carousel’ fraud.
See here if you wish to see a more detailed explanation about this type of fraud.
What are HMRC doing to counter MTIC Fraud?
Countering MTIC Fraud is HMRC’s top priority and they have a whole range of measures they can apply against businesses and individuals. These include:
- Issuing means of knowledge VAT assessments.
- Issuing VAT assessments disallowing input tax deduction where HMRC allege information contained in the invoice is incorrect.
- Issuing joint and several liability VAT assessments.
- Imposing joint and several liability excise duty assessments and seizing goods and vehicles from businesses dealing in excise goods.
- Imposing financial securities and penalties.
- Criminal prosecutions.
See here if you want more detailed information about these sanctions including real life examples.
Does this apply to me?
HMRC have widespread powers. For example, means of knowledge VAT assessments, VAT assessments disallowing input tax recovery and financial securities can be imposed on any businesses in almost any industry. If there is a VAT loss in your supply chains then you are at risk. See our affected industry page for further information.
If HMRC believe there is a problem in any area they will impose their sanctions with little thought about whether you are an innocent party in the supply chain.
The House of Lords European Union Committee examined the measures taken by HMRC to combat MTIC and the effects these could have on innocent businesses caught up in the chains. In their report the Lords concluded:
“The Government needs to take real and substantive steps to ensure that their actions do not damage innocent traders.”
“Missing Trader Intra-Community (MTIC) Fraud is an exceptional crime … but one which requires a solution which will neither propel the problem into other Member States nor place an over-onerous burden on legitimate business.”
"It is clear from the evidence we have received that a number of participants— often small businesses operating in the grey market…have been adversely affected by the Government’s attempts to eradicate the fraud in their industry.”
Do I have any defence against any of these sanctions?
Comprehensive due diligence checks into the businesses with whom you deal is essential to ensure you are dealing with legitimate and real businesses and to provide evidence to defend yourself if HMRC take any of these measures against you. For further information on due diligence please see here.
HMRC due diligence requirements are contained not in one Notice but spread across several notices. For a summary of the requirements contained in their various Notices see here. For the full versions of the Notices see our resources section.
We are able to provide services to meet all your due diligence requirements and help provide you with a defense from these sanctions. For further information please see our services page, or contact us on 0844 651 6852 or by email and we will be happy to assist.
