Source · Select Committees · Public Accounts Committee
Recommendation 4
4
Accepted
We are concerned that HMRC may be lagging behind other established tax authorities in preventing...
Recommendation
We are concerned that HMRC may be lagging behind other established tax authorities in preventing fraudulent VAT registrations. HMRC is constantly changing its processes to prevent criminals from exploiting the tax system. VAT is particularly susceptible to fraud and criminality as it can involve HMRC repaying large amounts to taxpayers. We raised concerns about a case where a criminal used a legitimate company’s details to apply for a VAT registration number and make fraudulent VAT repayment claims. We understand that the criminal was successful in the UK, but that safeguards adopted by the German tax authorities appeared more effective at identifying similar fraudulent activities at an earlier stage. Recommendation: HMRC should engage with its international counterparts to understand what lessons it can learn in preventing fraudulent VAT registrations and minimising the impact on honest taxpayers.
Government Response Summary
HMRC will engage further with international partners, including German tax authorities via its FCLO in Berlin, to understand how other tax authorities tackle VAT fraud through controls on registration, with target implementation by end March 2024.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Target implementation date: end March 2024 4.2 HMRC has in place an effective range of controls that protect the tax system from attack by criminals and other frauds. Since 2020-21, HMRC has prevented over £4.5 billion revenue loss from attempted repayment fraud. HMRC has well-established links with overseas tax authorities, through its fiscal crime liaison officer (FCLO) network, the Joint Chiefs of Global Tax Enforcement (J5) community and the OECD Forum on Tax Administration. HMRC works with those partners to understand the changing nature of criminal threats and respective capabilities to counter them. HMRC will engage further with international partners to understand more about how other tax authorities tackle VAT fraud through controls on registration, including engaging with the German tax authorities via its FCLO in Berlin (as referenced in the report).