Allegations of VAT Fraud Defeated | How Our Defence Secured A Successful Result
VAT fraud typically arises where a business withholds VAT from HMRC by failing to declare its true VAT liability. This may involve submitting inaccurate VAT returns in order to evade VAT payments or dishonestly claim refunds.
Deliberate VAT fraud can take many forms. Common examples include falsifying invoices, failing to declare sales, or participating in schemes such as missing trader intra‑community (MTIC) fraud, also known as carousel fraud.
It is not uncommon for HMRC to investigate a business if it suspects it of VAT fraud, and such investigations are often complex and can have serious consequences for those involved.
In a recent case, KANGS successfully assisted our client defeat serious allegations of fraudulent evasion of VAT, knowingly possessing, making and supplying articles for use in fraud and money laundering offences following a lengthy investigation conducted by HMRC.
HMRC alleged that our client had submitted misleading VAT returns which had resulted in fraudulent VAT repayments being received in an overall fraud that HMRC valued at approximately £8 million.
Mohammed Ahmed, an Associate Lawyer at KANGS outlines the scope of the HMRC investigation and the strategic steps taken by our team that led to a highly successful outcome.
Background to the HMRC investigation
HMRC alleged that several UK vehicle trading companies were engaged in the manipulation of VAT liabilities, through the purchase of motor vehicles in the UK and their alleged onward export to overseas entities.
Whilst the trading arrangements entitled companies to reclaim the VAT paid on acquisition, HMRC alleged that the vehicles were not genuinely exported but, rather than being shipped overseas, the vehicles were diverted back into the UK and sold domestically with the intent of avoiding the proper amount of VAT payable.
HMRC’s investigation scrutinised the activities of multiple companies involving the examination of numerous VAT repayment claims, mobile phones, laptops, external hard drives, and memory sticks containing tens of thousands of documents considered relevant to the investigation.
As part of its investigations, HMRC obtained Restraint Orders and Production Orders relating to personal and business bank accounts in order to access and examine the financial information from all parties under investigation.
How We Assisted Our Client
Upon receiving instructions from our client, we focused on collating all pertinent supporting evidence for inclusion in written Pre‑Charge Representations. These set out, in detail, the legitimate nature of our client’s trading activities and the reasons why HMRC’s allegations were ill‑founded, for submission at further interviews with HMRC.
Accordingly, our team:
- examined all existing relevant material including the Transcript from our client’s initial interview with HMRC, during which he openly answered all questions which had been presented to him,
- discussed, in great detail, all aspects of the operation of our client’s business and sought to establish the reasoning behind the allegations raised by HMRC,
- advised our client upon his position, the steps to be taken and the evidence to be gathered to support his defence to the allegations,
- examined all of the material served by HMRC including that contained within various digital devices,
- examined and compared numerous invoices, VAT receipts, and consignment notes,
- analysed personal and business bank statements, carefully tracking the flow of funds,
- collated further supportive information as considered necessary as our client’s defence preparation progressed,
- identified and instructed suitably experienced Counsel,
- compiled comprehensive, clearly presented and paginated Written Statements and document bundles for submission to HMRC, supporting our client’s innocence,
- supported our client at lengthy interviews with HMRC.
The Highly Successful Outcome
After more than three years of legal representations, attending interviews, and providing statements and submissions, we achieved the outcome sought.
HMRC scrutinised all of the evidence submitted by our team and confirmed that they would be taking no further action. This decision brought to an end several years of significant stress and uncertainty, and provides considerable relief to our client, who has now been fully exonerated of the allegations made against him.
Our client was a qualified accountant and highly successful entrepreneur, and when expressing his relief at the conclusion of the investigation stated:
“I first instructed Kangs Solicitors in 2022, when I met with Hamraj Kang. His knowledge and professionalism immediately reassured me in relation to the serious allegations I was facing.”
“From the outset, they demonstrated a high level of expertise and professionalism, which gave me confidence that I had chosen the right firm to represent me.”
“While I sincerely hope I never require legal representation again, I would have no hesitation in recommending Kangs Solicitors, or in instructing them again should the need ever arise.”
What to do if you are being investigated by HMRC
It is common that a company or individual’s first instinct is to contact their accountants and ask them to act on their behalf in the investigation. However, there is an important additional safeguard afforded to taxpayers where a solicitor is instructed rather than an accountant, and that protection is one of legal professional privilege.
Put simply, this means that communications between the taxpayer and their solicitor, together with any legal advice provided, are protected from disclosure to HMRC. For this reason, it is often advisable to instruct solicitors with specialist expertise in tax law.
What can we assist you with
At KANGS we understand the significant stress and uncertainty faced by individuals under a HMRC investigation. Our lawyers regularly represent clients subject to scrutiny by HMRC, the Serious Fraud Office (SFO), National Crime Agency and other enforcement bodies.
Our team also has a long history of successfully representing clients in complex tax investigations. We act for taxpayers in the full array of HMRC investigations including:
- Personal Liability Notices for company directors, officers and managers
- Tax Avoidance Schemes for both participants and promoters
With over twenty-five years of experience in both strategic negotiations and litigation with HMRC, we have the knowledge and experience to protect our client’s interests.
Please feel free to contact our team using the details below as they will be delighted to assist you.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
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