Missing Trader Fraud Defence

If you are facing accusations of missing trader fraud, or your business is the subject of an investigation, the expert solicitors at JMW can help. We have represented individuals and businesses in many different sectors against missing trader fraud charges and have both a robust understanding of this area of law and an impressive track record.

We have extensive knowledge of this area of the law and a track record of success in defending individuals accused of related offences.

To speak to a solicitor about allegations of missing trader fraud, call us on 0345 872 6666 or fill in our online enquiry form and we will get back to you.

Our Services

At JMW, we can provide legal help at any stage of a missing trader fraud investigation. This type of fraud is similar to carousel fraud and involves the theft of VAT. Although there are different methods, persons operating a fraud typically import goods VAT-free, sell them on to domestic buyers with the VAT added, and then keep this tax instead of paying it to the government as they should.

It is unfortunately very simple for innocent parties to become embroiled in fraudulent trading schemes, particularly if there are many different suppliers in a chain and there is not much face-to-face contact between firms working together. Proper due diligence in relation to suppliers is key and we have a comprehensive track record in advising firms on how they implement or demonstrate adequate due diligence to avoid prosecution or limit proceedings.

We have represented many people who became unwittingly involved in missing trader fraud as they were the middle man in a supply chain; in most schemes of this kind, it is only the importer and exporter at either end who are knowingly committing the offence.

In cases such as this, seeking legal advice quickly is absolutely essential and can make a critical difference in the outcome of your case.

Why Choose JMW?

Allegations of missing trader fraud are highly damaging and charges can result in large fines and even custodial sentences. It is therefore important to seek the help of an expert legal team that can provide the advice, guidance and representation you need at such a challenging time. The team at JMW has the experience and expertise to give you the best chance of reaching a satisfactory conclusion.

What Is Missing Trader Fraud?

Missing trader fraud is a type of VAT fraud that sometimes occurs between the EU and the UK. It is also known as "missing trader intra-community fraud", "MTIC fraud" or "carousel fraud," and exploits the VAT system by creating a chain of transactions between businesses to falsely reclaim VAT. The fraud involves a series of companies buying and selling goods, usually high-value items like electronics, within the same jurisdiction. The aim is to illegally claim VAT refunds on goods that have been purportedly traded, but which in fact remain under the control of the same parties.

While UK VAT rules have changed since Brexit, it is still possible for organised crime groups and others to engage in MTIC fraud through the UK. It is also common within the EU, and British importers can find themselves inadvertently caught up in these transactions. The process typically works as follows:

• Importation without VAT: A trader (Company A) imports goods from an EU country. Because the goods are traded within the EU (or another jurisdiction with similar rules about VAT liability), no VAT is charged on this transaction.
• Domestic sale with VAT: Company A sells the goods to another company (Company B) within the same country and charges VAT on the sale.
• Trader goes missing: Company A, which collected the VAT, disappears without paying the VAT to the tax authorities. This is why it is called the "missing trader."
• Further transactions: Company B may then sell the goods to a third party, Company C, which sells them on again. This will often create a chain of transactions that can be difficult to trace back. This may be done by companies working together, or the goods may simply be sold on to unsuspecting parties before being bought back by the original fraudsters. Each company in the chain charges VAT and passes it on, but the original VAT from the first sale (by the missing trader) was never paid.
• Exportation and VAT refund: Finally, the goods are exported to another EU country by the last company in the chain (often referred to as a "buffer" company). This company claims a VAT refund from the tax authorities for the VAT it paid on the purchase of the goods. The company can deduct input tax that it paid as VAT from its output tax liability, and it is not charged VAT to export the goods.

The mechanisms behind cross-border VAT fraud - for example, from the EU to the UK or vice versa - may be different but the underlying process by which this fraud is committed remains the same. In some cases, the goods are re-imported and the cycle repeats. This variation gives its name to "carousel fraud" as the same goods can circulate multiple times, which creates a "carousel" and offers repeated opportunities for VAT fraud.

The complexity and rapid movement of goods and money make it difficult to detect and prevent missing trader fraud. It also means that innocent third parties can get caught up in the process. A business may purchase goods, file a VAT return, and sell the goods on without anyone realising it is caught up in a transaction chain of this type. Meanwhile, detecting and preventing the problem may involve cross-border collaboration between authorities, which can involve large-scale investigations.

For this reason, any business or individual who is accused of perpetrating MTIC fraud in this way, or connected to an investigation of this nature, should seek legal counsel as soon as possible. There can be severe penalties associated with carousel fraud, MTIC fraud or any other type of VAT fraud. It is important to prepare carefully for investigations and interviews with authorities, and begin to mount a defence as soon as possible. 

What are the penalties for UK VAT fraud?

Businesses and individuals found to have committed missing trader fraud in the UK can face severe penalties. The specific punishment you might receive if you are found guilty depends on the nature of the offence that you are charged with. In serious cases, you may be charged with a criminal offence. In these cases, individuals can face substantial prison sentences. Depending on the severity and scale of the fraud, sentences can range from several years to up to 14 years in the most serious cases.

Financial penalties are often also imposed, including fines and the need to pay the owed VAT with interest. HMRC can issue punitive fines alongside interest and additional charges, which can make financial penalties quite significant. Under the Proceeds of Crime Act 2002, HMRC can seek confiscation orders to seize assets that are intended for use in fraudulent activities. This means that any goods used to commit VAT fraud may be confiscated, and assets will often be frozen during an investigation. This can leave you without the funds you need to pay for legal support. If you find that your personal or business assets have been frozen during an investigation, contact JMW's expert account freezing order solicitors as soon as possible.

Directors of companies involved in missing trader fraud can be disqualified from acting in this capacity for a period of up to 15 years. People who are disqualified cannot manage companies or act as directors, and will usually face other penalties. 

By approaching the investigation process proactively and seeking legal advice, business owners and directors can mount a defence at the earliest opportunity. The solicitors at JMW can present mitigating circumstances to make sure penalties are fair and that all of the relevant factors are taken into account. We can also help you to gather evidence and prove your innocence during any litigation that arises.