In November of last year, when Dylan Davies checked his mail, 580 brown envelopes fell to the floor.
In the following six months, he received tax invoices for 11,000 Chinese companies that fraudulently registered for VAT using his Cardiff address.
Mr. Davies, who received letters from HM Revenue & Customs (HMRC) demanding £500,000 in taxes, described the experience as “horrendous.”
HMRC admitted that the tax agency was not alarmed by the situation.
Mr. Davies stated, “You would think that with the technology available today, there would be a system that would have detected it immediately.”
He informed the police and the IRS, but the brown letters continued to arrive.
When letters from debt collection agencies began to appear, he became even more concerned that bailiffs might come “charging down the door” and feared that the amount of money involved would result in the seizure of his property.
The director of HMRC acknowledged the issue in a letter to the public accounts committee of the House of Commons.
Jim Harra, the permanent secretary, stated, “2,356 of the businesses have a tax debt, and we have taken measures to prevent further contact with this address about these debts.”
Mr. Harra stated that investigations “to date have uncovered no evidence of fraud or fraudulent intent” and that 70% of the businesses registered to Mr. Davies’ address operated in online marketplaces.
In January 2021, the law changed, requiring online marketplaces such as Amazon and eBay to collect VAT from foreign sellers and remit it to HMRC.
However, if a corporation has a UK VAT address, which it does not need to verify, it must pay..
Graham Barrow, a financial crime consultant, stated that he suspected fraudulent activity on the part of overseas companies.
“From all appearances, it appears to be VAT fraud,” he said.
There is no other reason to register for VAT at the address of a stranger, especially for 11,000 businesses.
He believes that the companies are collecting VAT from their clients but not remitting it to HMRC.
Mr. Barrow called it “incredible” that HMRC missed Mr. Davies’ enormous number of VAT-registered entities.
He stated that a person may suffer severe consequences through no negligence of their own.
“There may be a significant number of county court judgments registered to your address,” he said.
Mr. Davies stated that HMRC needed to “tighten up completely,” claiming that “registering a company for VAT is easier than obtaining a bus pass.”
HMRC stated, “We are examining our operational processes for managing high-volume address changes, as well as any system vulnerabilities associated with this behavior.”
