23/03/2017

HM Revenue & Customs is seeking views on policy options to tackle supply chain fraud committed by organised criminals who cheat the exchequer by setting up businesses specifically to fail to pay Vat and mis-declare income tax and related NICs on the provision of labour in the construction sector. 

‘VAT fraud in labour provision in construction sector’* is concerned with solutions to two types of fraud.

1) So-called ‘missing trader’ supply chain fraud, where fraudsters take over an existing business with gross payment status (GPS), start mis-declaring its construction industry scheme (CIS) remissions and Vat liabilities and artificially lengthen the supply chain to make it difficult to reconcile the main contractor’s CIS declaration with the subcontractors’. When HMRC finally does manage to identify mismatches and intervenes, the businesses concerned go missing.

2) The use of off-the-shelf limited companies with no previous history which, under current rules, can be used by fraudsters to obtain GPS status and register for Vat.

HMRC stresses that options in both cases must not adversely affect the majority of honest small and micro firms in the construction sector