UK: HMRC implements import anti-fraud campaign

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Information about UK: HMRC implements import anti-fraud campaign

Published on March 15, 2016

Author: AlexBaulf


1. © 2016 Grant Thornton UK LLP. All rights reserved. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication. GRT100456 Summary The UK exchequer loses an estimated £1.5bn to import fraud each year. In order to tackle this, there may soon be measures to shift the liability for this fraud onto innocent parties who facilitate the fraud by providing trading platforms in the UK. These businesses must act to ensure that suitable due-diligence procedures are implemented in the supply chain. 8 March 2016 Enhanced due diligence requirements on 'facilitators' The EU's anti-fraud office, OLAF has estimated that €500bn is lost to import fraud every year in the EU. Here in the UK, HMRC has estimated that it loses £1.5bn per year in import VAT through various frauds. In an attempt to tackle the growing problem, HMRC has announced that it has stepped up action to tackle fraud in areas such as Onward Supply Relief (OSR), Valuation, Low Value Consignment Relief, postal fraud and Classification fraud. In the case of OSR, goods entered are relieved from VAT on the basis that they will be supplied onto another Member State. However, the goods will go 'missing' in the UK and no VAT or duty is ever declared. In the other cases either the goods are entered below their correct value or they are deliberately classified under an incorrect tariff heading. Either way, the amount of VAT and duty due on importation is well below the value that it should be. HMRC has stated that this crime is predominantly driven by an illicit Chinese footwear and textile industry. Other areas of government such as Trading Standards are also getting involved in the campaign, as this fraudulent activity also encroaches on areas such as consumer protection and intellectual property rights. In addition to the adverse revenue effect on tax collection, HMRC is concerned about the impact this is having on legitimate trade and is preparing to take steps to protect legitimate traders. At EU level, there is widespread acceptance that OSR is not fit for purpose, and that it may have to be withdrawn and replaced with a facilitation that is less liable to fraud. In many cases, HMRC is unable to apprehend the perpetrator of these types of fraud due to them either 'disappearing', or the perpetrator being outside of HMRC's jurisdiction. HMRC is looking at alternative measures to combat this fraud. As such, it has been strongly indicated that HMRC will look to shift the liability onto EU registered traders who are innocently facilitating this trade. HMRC describe these operators as "fulfilment houses." (ie platforms through which the goods are sold) What do I need to do If your business operates in this sector, we recommend that, as a starting point, you adopt robust due-diligence procedures to ensure that you know the third party with whom you are trading. As HMRC is, in many cases, unable to pursue the trader, the indication is that measures may soon be implemented to pursue facilitators and make them liable for the payment of any import VAT and duty. Please contact Grant Thornton for any further information on this topic. HMRC implements import anti-fraud campaign VAT Alert Contact Ian Worth Customs Associate Director (0)207 728 2174 Ben Price Customs Manager (0) 297 728 3426 Ilektra Sarri Customs Executive (0)207 728 3437 Michael Alexander Customs Associate (0)207 728 2532

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