TaxCorporate Tax£12bn in VAT escapes taxman

£12bn in VAT escapes taxman

The Treasury's coffers were deprived of £12bn of VAT last year, after the difference between real and theoretical receipts increased for the third year running.

Link: Treasury winning VAT fraud battle

The so-called ‘VAT gap’ grew by a percentage point to 15.7%. Leaks in the system included ‘missing trader’ fraud (such as carousel fraud), tax avoidance and other losses due to non-compliance.

The government has set a target to reduce the ‘VAT gap’ to 12% in 2005/6. It claimed some success in tackling missing trader fraud, which cost the taxpayer up to £2.6bn in 2002/3, down 5% from 2001/2.

The reduction followed a crackdown launched in September 2000 and a cash injection given in April 2002. The abuse takes advantage of VAT exemption on goods traded between EU countries. Bogus traders import goods tax-free, sell them, and disappear along with the 17.5% VAT due to the taxman.

In the pre-Budget report, Gordon Brown announced further measures to tackle carousel fraud, the complex version of missing trader fraud in which goods are sold through a series of companies across the EU.

Related Articles

‘Google tax’ nets HMRC £281m

Corporate Tax ‘Google tax’ nets HMRC £281m

6d Emma Smith, Managing Editor
Should I incorporate my buy-to-let business?

Corporate Tax Should I incorporate my buy-to-let business?

1m Emma Rawson
R&D incentives: How businesses can reap the rewards of innovation

Corporate Tax R&D incentives: How businesses can reap the rewards of innovation

2m Sam Swansborough
HMRC tax evasion assistance requests double in five years

Corporate Tax HMRC tax evasion assistance requests double in five years

3m Emma Smith, Managing Editor
Q&A with the Financial Secretary to the Treasury

Corporate Tax Q&A with the Financial Secretary to the Treasury

3m Emma Smith, Managing Editor
R&D incentives: How businesses can reap the rewards of innovation

Corporate Tax R&D incentives: How businesses can reap the rewards of innovation

2m Vincent Papa
OTS report: Corporation tax should follow accounts

Corporate Tax OTS report: Corporation tax should follow accounts

2m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

2m Alia Shoaib, Reporter