A Cardiff man was hit with tax bills totalling £500,000 from 11,000 firms, largely from China, after HMRC allowed them to register for VAT to his tackle.
The extraordinary case “looks to all intents and purposes like VAT fraud”, based on one tax knowledgeable, who urged HMRC to fully “tighten up” the VAT registration course of for foreign firms.
Dylan Davies, the recipient of 1000’s of letters from HMRC and debt collectors demanding a minimum of £500,000 in unpaid taxes, stated the “horrendous” state of affairs had left him squarely within the sights of bailiffs who might come “charging the door down”.
The first signal of hassle got here in November when he instantly obtained 580 brown envelopes in a single day’s put up – an unlimited mountain of bills quickly swamped compared by the quantity that continued to flood in over the following six months.
“Where does this end?” Mr Davies requested BBC Wales’s X-Ray programme. “You’ve now got debt collection agencies on behalf of HMRC who are going after these debts. Where are they going to go after them – this is the only address they’ve got.”
Mr Davies is reported by The Times to have contacted the Welsh consumer affairs show in desperation after first attempting to alert HMRC by way of his solicitor, with no response.
His case has since been raised by MPs who sit on the Commons public accounts committee, whose Labour chair Meg Hillier wrote to HMRC’s most senior civil servant on 17 March, demanding motion. She described the case as “prima facie large-scale VAT fraud” which “points to systemic weaknesses” within the system.
But in his response 12 days later, Jim Harra, head of HMRC, stated its ongoing investigations “so far have found no evidence of fraud or fraudulent intent” referring to Mr Davies’ case.
Mr Harra conceded that 11,000 firms had modified their registered tackle to that of Mr Davies’ in Cardiff over a six-month interval, and stated that 2,356 of the companies owed a tax debt.
HMRC has since contacted Mr Davies “directly to apologise and to assure him that we had taken urgent action to prevent further disruption”, Mr Harra stated, including that he will likely be provided “compensation for the time it took us to resolve the matter”.
Asked how HMRC failed to note 11,000 firms registering to 1 residential tackle in such a brief interval, Mr Harra stated: “It is not unusual for multiple businesses to operate from one address and, as the address used was not the subject of any transaction monitoring or watchlist, the risking rules did not identify the issue.”
New post-Brexit guidelines, in power since January 2021, imply that Amazon and different on-line marketplaces should acquire VAT from abroad merchants themselves and pay it to HMRC. But this isn’t required if firms have a registered UK tackle for VAT – for which no proof of tackle is required.
It is at present simpler to “register a company for VAT than it is to go and get a bus pass”, monetary crime advisor Graham Barrow advised X-Ray, urging HMRC to “tighten up completely”.
It “beggared belief” that HMRC didn’t discover the variety of firms being registered for VAT at Mr Davies’s flat, stated Mr Barrow, who suspects the businesses are gathering VAT from their consumers and easily pocketing it.
“It looks to all intents and purposes like VAT fraud,” he stated. “There’s no other reason why you’d register for VAT at a complete stranger’s address, particularly for 11,000 companies to do that.”
HMRC knowledge means that round 70 per cent of the companies utilizing Mr Davies’ tackle operated on on-line marketplaces, which supplied knowledge to the taxman. There is not any proof that the remaining 30 per cent have offered items within the UK or have any excellent VAT to pay, based on Mr Harra’s letter.
An HMRC spokesperson stated: “We are reviewing our operational processes for managing high volume address changes, including understanding any vulnerabilities in our systems associated with this behaviour.”