(2) what the percentage of cases is in which the extended verification process for VAT repayments have been determined by HM Revenue and Customs to be (a) connected with missing trader intra community fraud and (b) otherwise incorrectly claimed or improperly paid.
The vast majority of VAT repayment claims are paid promptly. However, in response to the rapid increase in missing trader intra-community fraud activity in late 2005 and early 2006, HM Revenue and Customs are actively checking a greater number of suspect claims. HMRC have deployed an additional 700 staff in 2006-07 to ensure that verification of these claims can be carried out as effectively and efficiently as possible.
The latest data indicates that over 95 per cent. of traders, whose returns are subject to the current verification programme, have so far been found to be participating in, or profiting from, MTIC fraud, or there is sufficient suspicion to warrant further investigation. Only 1 per cent. of the VAT withheld under this programme has been found to be properly payable. To date, the courts have found that HMRC’s actions have been proportionate and reasonable.
HMRC does not hold centralised information relating to “(b) otherwise incorrectly claimed or improperly paid”. VAT incorrectly claimed or improperly paid can result from a diverse number of factors, including other fraud, avoidance or error and gathering such data would incur disproportionate costs.