What is VAT fraud? Examples of investigations and convictions

VAT fraud can appear in several different guises, but most offences fall under one of two umbrellas:

• Mis-declaring VAT

  Businesses must declare their income to the authorities in order to pay the correct amount of tax. If a company mis-declares its income, and the figure is lower than the actual amount, this can amount to a fraud.
  

• Missing Trade Intra-Community (MTIC) fraud

  This is a complex fraud perpetrated by organised criminals.

  Under EU tax regulations, a VAT-registered business from an EU member state does not have to pay VAT if it sells goods, or supplies services, to another VAT registered business in a different EU member state.

  The fraud happens when one of the companies in the chain disappears, so that it does not account to HMRC for the VAT it receives. In other words, it becomes a missing trader. The way it works is that companies import goods VAT-free from another EU country, sell them with VAT, incur huge VAT liabilities and then become insolvent.

Prominent cases in recent years

Investigation Admiral

Investigation Admiral is considered to be the biggest VAT fraud ever investigated in the EU. The damage is estimated to be around €2.9 billion.  

This was a case of MTIC fraud. The suspects established companies in 15 EU Member States and supplied electronic goods. End customers paid VAT on their purchases, but the companies that sold the goods did not fulfil their tax obligations. Instead, they disappeared.

Other companies in the chain subsequently claimed VAT reimbursement, and then the proceeds of that criminal activity was moved into offshore accounts.

In May 2025, the Central Criminal Court of Lisbon (Portugal) convicted 10 individuals and 13 companies for their roles in setting up and operating the scheme. Prison sentences ranged from three years to eight years.

Operation Barbados

An Organised Crime Group carried out a complex, systematic MTIC fraud which related to selling electrical goods, wholesale metals, and Voice Over Internet Protocol (VOiP) airtime.

There was a 10-year investigation into the fraud, and the trial lasted 6 months. The value of the fraud was around £20 million.

A Supreme Court decision

The case of Bilta (UK) Ltd (in liquidation) and others v Tradition Financial Services Ltd [UKSC] 2023 33 went all the way to the highest court in the UK, the Supreme Court. The underlying case was about another MTIC scheme.

The defendant, Tradition Financial Services Ltd brokered the trades that constituted the MTIC Fraud. Tradition either knew or suspected that the trades were not legitimate. The Supreme Court decision means that contracting parties who were aware of the fraudulent activities of the company, had to contribute towards the liquidation.

A business deregistered for VAT fraud

In Impact Contracting Solutions Limited v The Commissioners for HMRC [2025] EWCA Civ 623, the Court of Appeal said that HMRC has the power to deregister a business which has facilitated VAT fraud, if it is a proportionate step.

HMRC found out that ICSL were dealing with around 3,300 mini-umbrella companies overseas in order to avoid tax. The mini-umbrella companies were charging ICSL VAT, but those same mini-umbrella companies were not accounting for VAT properly themselves.

HMRC said that ICSL knew, or should have known about the fraudulent activities of its contractors.  

Fraudulent VAT returns

The owner of a nightclub in Blackpool, and his accountant, were convicted for evading £4.9 million in tax. They submitted fraudulent VAT returns to HMRC, where they deducted tax and National Insurance payments from employees’ salaries but failed to pay the sums to HMRC. The nightclub owner (Mr Kelly) was arrested at Gatwick Airport in November 2018.

Both men were found guilty on 23 April 2025 and they are due to be sentenced on 25 July 2025.

Legal representation for VAT fraud

The police can arrest you if they think you have committed the offence of VAT fraud. At the station, you will have an interview under caution and you should have a solicitor present for that interview. We can represent you and help to protect your rights.

0333 3448377 | info@harewoodlaw.com