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Welcome to the FMB Chartered Accountants Blog. We answer all of your financial and accountancy questions, as well as keep you up-to-date with the latest news from FMB.

How to Protect your Business from Becoming Involved in VAT Fraud

David McArdle - Saturday, July 26, 2014

Revenue have recently published guidelines on How to Protect your Business from Becoming Involved in VAT Fraud.




These guidelines are there to warn about the consequences of becoming involved in a set of transactions with a VAT fraud even if the transactions in which the business is involved are not themselves unlawful.


What to expect in the Revenue Guidelines

The European Court of Justice in a number of cases concerning VAT fraud has held that:


(a) a taxable person who knew or ought to have known that, by his purchase of goods, he was party to a fraudulent transaction can have his right to deduct related input credits refused.


(b) a 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 intra - Community supply to that purchaser. Revenue will apply the principles established in these cases where it has satisfied itself, having regard to objective factors, that the taxable person knew or ought to have known that he was participating in a transaction connected with VAT fraud. Revenue will also apply addition penalties where appropriate.


Due Diligence

It is good business practice to undertake due diligence when entering into a business transaction, particularly with an unknown party. In order to help avoid being an unwitting party to a VAT fraud, we have set out examples of reasonable steps you can take to establish the integrity of your customers, supplies and supplies. Revenue expects that as legitimate traders you will, on an ongoing basis, assess the integrity of your supply chain and the suppliers, customers and goods within it.


Risk Indicators

You should be particularly alert to practices that deviate from normal commercial practices within you industry. To minimise your risk, you should, in addition to the due diligence checks, consider:


  • The nature of the supply;

  • Payment arrangements and conditions; and

  • Details of the movement of goods involved.

“If a commercial proposition looks too good to be true it probably is and you need to undertake whatever inquiries are necessary to establish the bona fides of the transaction or transactions concerned and the trading partners involved" - Revenue


Get the full Guidelines from Revenue HERE.


Contact our team for advice and information. Call FMB on 01 645 2002 or email enquiry@fmb.ie.

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