What is MTIC / VAT fraud?
MTIC fraud — often called ‘carousel fraud’ — exploits the EU cross-border VAT system. A missing trader charges and fails to account for VAT, while downstream traders reclaim input tax, generating a chain of fraudulent transactions. HMRC investigates under the Fraud Act, the Value Added Tax Act 1994, and proceeds of crime legislation. Cases are document-heavy, multi-jurisdictional, and technically demanding.
These cases are among the most document-intensive in the criminal courts. A single prosecution can involve millions of pages of trading records, accounting evidence, and electronic communications, reconstructed over years. Effective defence requires not only legal expertise but coordinated review of the financial picture.
Common HMRC fraud allegations
- MTIC / carousel fraud involving cross-border trading chains
- VAT evasion through suppressed sales or fictitious input tax claims
- Diversion fraud and duty-suspended goods
How we defend HMRC cases
- Working with forensic accountants and VAT specialists from the outset
- Tracing transaction chains and challenging the prosecution's reconstruction
- Separating legitimate trading from alleged complicity in the fraud
- Challenging knowledge and the dishonesty element
- Managing parallel civil VAT assessments and penalties
- Defending confiscation proceedings reflecting the alleged benefit
Knowledge and dishonesty
Knowledge or suspicion of the fraud is essential to a criminal conviction. Honest traders caught in an otherwise fraudulent chain may have a defence — though HMRC may still seek civil assessments and denial of input tax recovery. We examine what you actually knew and the commercial reality of your trading.
The prosecution often seeks to infer knowledge from association, transaction patterns, or ‘red flags’. We test those inferences against the contemporaneous documents, the trader’s actual conduct, and the commercial context. Where a trader acted honestly, even if unwisely, that is a defence that must be fully explored.
Civil and criminal crossover
HMRC frequently runs civil VAT assessments alongside criminal investigations. The interplay between the two affects evidence, disclosure, and strategy. We advise on both tracks and on protecting your position where the same facts could result in both criminal charges and civil recovery.
Decisions made in the civil sphere — responses to assessments, provision of information, appeals — can affect the criminal case. We coordinate the two, ensuring that compliance with one process does not prejudice the defence of the other, and that strategy is consistent across both.
Frequently asked questions
A carousel describes a series of cross-border transactions in which goods are imported VAT-free, sold on with VAT charged, and the VAT not accounted for — while the final trader reclaims the input tax. The goods may circle through multiple traders, hence the term. The prosecution must prove knowledge and dishonesty at each level.
Knowledge or suspicion of the fraud is essential. Honest traders caught in an otherwise fraudulent chain may have a defence — though HMRC may still seek civil assessments and denial of input tax recovery. We examine what you actually knew and the commercial reality of your trading.
These are among the most serious fraud cases. Conviction can lead to lengthy custodial sentences and confiscation orders running into millions of pounds. Early, specialist representation is essential given the volume and complexity of the evidence.
Yes. HMRC frequently runs civil VAT assessments alongside criminal investigations, and decisions in one track can affect the other. We coordinate both, ensuring compliance with the civil process does not prejudice the criminal defence, and that strategy is consistent across both.
Honesty is a defence. If you acted honestly, even if unwisely, and did not know or suspect the chain was fraudulent, that must be fully explored. We test the prosecution’s inferences about knowledge and ‘red flags’ against the contemporaneous documents and the commercial reality of your trading.