Tax crackdown threatens to make buyers pay VAT twice

23 April 2003
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24 April 2003 | David Arminas

Purchasers who unwittingly deal with fraudulent mobile phone and computer parts suppliers will now have to prove they did so innocently or risk paying double VAT.

In a major clampdown on VAT fraud, HM Customs & Excise will reach down the supply chain in an attempt to claw back up to £2.7 billion of VAT lost each year from tax-dodging suppliers.

Customs gained the powers, announced as missing trader intra-community VAT fraud, in chancellor Gordon Brown's budget on 10 April.

It wants to catch purchasers who buy goods at artificially low prices from suppliers they know are fudging VAT payments, making the buyer an accomplice in an "artificial supply chain".

Buyers found guilty will not only fail to get a repayment of the VAT paid to the disappeared supplier, but Customs can demand it again from the buyer.

A Customs spokesperson told SM: "In the worst case, buyers could pay VAT twice on goods from suppliers that disappear. Our message is to know who you deal with, do basic checks".

"For example, be aware of companies whose managing directors have been involved in several liquidations."

Purchasers most at risk were inexperienced staff in small to medium-sized organisations.

"Customs will write to them saying they may be dealing with a fraudulent supplier and request details of all transactions to prove they were buying in good faith," the spokesman said.

But John Kennedy, a partner in Deloitte & Touche's VAT division, warned that Customs "needs to tread carefully" to avoid catching innocent buyers whose replies were unsatisfactory.

Roy Ayliffe, director of professional practice at CIPS, said the institute would liaise with Customs on how best to protect innocent buyers.

Customs has launched a consultation on its new powers online at


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