VAT (Value Added Tax) is added to most products and services sold by VAT-registered businesses.
The current VAT registration threshold for businesses is where their taxable turnover reaches £90,000 in any 12-month period. However, businesses may also choose to voluntarily register for VAT online.
Recently, there have been increasing reports of VAT related fraud. This article will make you aware of some of the most recent scams we’ve encountered…
Registering for VAT
To understand how these fraudulent activities work, it’s important to know what the VAT registration process involves.
Generally, businesses register for VAT online, although paper registration is possible.
Once registered, they’ll receive:
- A 9-digit VAT registration number to include on all invoices raised
- Information about setting up a business tax account (if not created already)
- Information about when to submit the first VAT return and payment
- Confirmation of the VAT registration date
Sign up for VAT online account as soon as you receive the VAT registration number.
Then, businesses can start charging VAT on sales and reclaiming VAT.
If a business has charged its customers less VAT than they’ve paid on purchases, HMRC will usually repay the difference. This repayment will be sent directly to the relevant bank account, or HMRC might send a ‘payable order’ check.
Recent fraud
Newly registered VAT accounts are being hijacked.
Fraudulent Government Gateway accounts are being set up in legitimate businesses’ names, bank details are changed by the fraudster, and repayment claims are being submitted.
Most newly VAT registered traders will have a VAT refund on their first return. Many young businesses rely on this refund, so this scam can be particularly damaging.
As well as this, businesses who are victims of this scam are unable to file returns until HMRC can respond to the fraudulent activity and remedy the account issues. Resolving the issue with HMRC can be time-consuming. In this case, business owners may need to retain one or two quarters of their VAT return liabilities, for when they can file their backlogged returns.
Potential solution
From the start of 2026, HMRC has introduced an additional level of security to tackle VAT fraud. This requires the VAT registration application reference number to be included when enrolling for VAT services on an online business tax account. This reference number is generally provided on screen and by email, following the submission of an online application through HMRC’s VAT registration service.
If an application was made by paper, the reference number should appear on any written correspondence received from HMRC confirming the VAT registration. The reference number will start with ’0990’.
HMRC has advised all businesses registering for VAT to add the VAT online service to their business tax account as soon as they receive their VAT registration number.
Report fraud
If you suspect your VAT account has been accessed by someone else, you should contact VAT online services.
Act quickly. Fraudsters are relying on the delay when the business owner is waiting to receive their VAT certificate in the post.
Inform HMRC that your business is a victim of fraud. When speaking/corresponding with them, make sure no surcharge/late filing letters will be sent and no debts will be chased and collected. Prevent further complications and confusion.
Need some guidance?
Burton Sweet can assist you in remaining VAT compliant. Our team can deal with all your VAT recording and filing as part of a wider bookkeeping service, or if you prefer to keep your own books, we can simply review and file the VAT returns for you, using our Making Tax Digital compliant software.
