VAT Registration Fraud- Everything you need to know.

There is a scam targeting newly VAT-registered businesses across the UK. Scammers are getting hold of freshly issued VAT numbers, adding them to Government Gateway accounts they control, and submitting fraudulent returns to reclaim VAT. Their aim is simple. File a fake return and divert the repayment into a bank account they control. Companies that register for VAT but delay linking the VAT service to their Government Gateway are especially vulnerable.

How the scam works

1. A business applies for VAT and receives a VAT registration number
2. Before the genuine business owner sets up their online access, a fraudster quickly links the VAT number to a Government Gateway ID they control. This means the scammer can sign into HMRC online services for that VAT number and submit returns.
3. They then submit a return that requests a refund. HMRC may issue automated notifications. The repayment is sent to the bank details the fraudster has supplied or changed.
4. HMRC may pick up on this and launch an investigation, but that may not always be the case. Whilst they do this, it may mean you can't access your VAT account or submit real returns. Businesses can be left unable to file, chased for missing returns, and alerted about repayment that they never requested. Recent changes to the online VAT setup process aim to make it harder for criminals to hijack new registrations.

Important Things to Spot

Look out for all of these signs that your number may have been used. If you see any, treat it as suspiscious and act quickly.

• Letters and emails regarding returns that you haven't submitted.
• Unexpected repayment notifications to your business.
• A letter or email saying your "VAT Account has been updated."
• Errors occur when you try to add VAT services to your Government Gateway because the VAT number is already linked to another account.
• Changes to your VAT account contact details or bank details that you did not make.

What to do if this happens to you

1. Keep track of all letters and notices you receive, including dates they were sent. Record the date and time of any phone calls.
2. Wait for letters bearing instructions before you try anything that could confuse the HMRC process. HMRC may ask you to follow a particular path to secure the account.
3. You WILL receive fines during this process. Make sure you receive verbal confirmation that you will not have to pay these as early as possible. Get the name, team and timestamp of anyone who gives you that promise.
4. Report it to your accountant or agent, who will help you every step of the way. They can act as your intermediary with HMRC and help gather evidence, This can help you save a bit of time, as they will deal with HMRC directly to help fix this VAT registration fraud.
5. Don't reply to suspicious emails. Do not click links in emails titled "VAT REFUND PENDING" or similar. If you receive such an email, do not open attachments or follow links, instead keep a record of this and inform your accountant or agent.

If HMRC confirms fraud, ask for written confirmation of the outcome and any instruction on next steps for filing correct returns and reclaiming legitimate repayments.

What can I do to avoid becoming a victim of the scam?

• Set up your Government Gateway ID promptly the moment you reciee your VAT number. The shorter the delay, the less chance scammers have.
• Stay alert. Monitor communications from HMRC and your bank.
• Be vigilant and check bank details on your portal are correct. If you see a bank account you do not recognise, report it immediately.
• Check and remove anyone who no longer has the authority to make decisions on behalf of the company on the gateway. Keep user access tight.
• Periodically change passwords, especially if they were known by someone who has now moved on or no longer needs access. use strong, unique passwords and enable multifactor authentication where possible.

What happened to a client of ours- and how we fixed it.

If this occurs for you, it can be scary. We understand, as we have seen it happen to clients before. Once, these fraudsters diverted over £15,000 in VAT repayments before it was caught. We immediately raised it with HMRC, who confirmed the fraudulent VAT activity and stopped the payment, yet it took nearly a year for it all to smooth out. As a business owner, this can be highly stressful. Your agent/accountant can keep on top of this all for you, giving you peace of mind and dealing with HMRC directly.

During the whole process, the client received a VAT inspection, and we consistently pushed for no penalties. After the whole investigation, HMRC cleared the client of any liability. This was only due to the consistent follow-ups and careful record-keeping.

Being a victim of this particular VAT fraud can be scary. However, if you follow our steps and stay vigilant, you can minimise the effects it can have. If in doubt, always contact your accountant or get in touch with us here.