How to protect your #Business from becoming involved in #Vat fraud? #Ireland #irishbizparty In a number of cases recently concerning vat fraud, the European Court of Justice (ECJ) has held that (a) a business (taxable person) who knew or ought to have known that, by his/her purchase of goods, he/she was party to a fraudulent transaction can have his right to deduct any credits on vat on purchases refused; and (b) a business (taxable person) who knew or ought to have known that the transaction carried out was part of a tax fraud committed by the purchaser may be denied the right to zero rate the EU supply to that purchaser. The Revenue Commissioners have decided the principles established in those cases will apply where it can be satisfied that the business in question knew or ought to have known that he/she was participating in a transaction connected with Vat fraud. The Revenue will apply additional penalties where appropriate. Therefore, it is important for you and your business to put preventative steps in place. Remember if a supplier does not pay the Vat to the Revenue, you will not receive a credit in your Vat return. Similarly if you do not charge Vat to an overseas customer and it turns out that customer was not genuine for whatever reason, your business may then become liable for the Vat on the sale as if the sale was to a Irish customer. When entering into a business transaction, particularly with a new supplier or customer, it is good business practice to undertake some simple due diligence. It is important, and the Revenue expects, that you will establish the integrity of your suppliers, customers and goods on an on-going basis. Some actions that you can take are (1) Obtain proof of vat registration and a copy of the certificate of incorporation (if a company); (2) Obtain trade references in writing and follow through on them (very often in my experience, a business will go to the trouble of getting a written trade reference about a prospective supplier or customer but then doesn’t go to the bother of following up on it – well nine times out of ten you’ll get away with it but as they say it only takes one small fire to get burnt. (3) Make personal contact at their premises with a senior person. Never deal with a supplier or customer who will neither go to the trouble of meeting you nor suggest meeting with you. (4) Obtain the bank details of the prospective supplier to ensure payments are made to the correct party and not to a third party and in the case of an overseas transaction that the prospective supplier and bank share the same country of residence. When entering into a business transaction, you should also be alert to any practices that are different from normal commercial practices in your industry, here you should consider the nature of what is being supplied, the payment arrangements, conditions and details of how the goods will be transported to you. The Revenue has highlighted some indicators that could alert you around the legitimacy of suppliers, the commercial viability of the transaction and the viability of the goods. A few brief examples would be what is their history in the business, how long they are in business and their capacity to offer the deal to you, have they referred you to other customers who have accepted the same terms, are they offering a deal too good to be true, are the goods insured and warranted, does the deal require you to make payments to a third party, are they offering a formal contract etc. The foregoing is not exhaustive and further indicators are available on the Revenue website. I hope you find this useful. If you have any other questions or queries on any of the above, please feel free to contact me. Timothy Kelliher Chartered Accountant
Posted on: Thu, 24 Jul 2014 20:02:48 +0000
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