is this VAT fraud?

"it sounds like you are seething with jealousy that the other guy has set up this operation, indded instead of telling all the world about it why dont you simply do the same, instead of grassing on your competitors, who no doubt is doing much better than you in any case.

Heh, heh. His initials wouldn't happen to be GN, would they?

But you haven't answered the original question - is it fraud or not?

"dietz" wrote

Where exactly is "offshore"?

Question - If his (UK) Company A doesn't need to charge VAT when selling services to his "offshore" company, then why doesn't the offshore company simply "cut-out the middleman" and buy the services directly from the initial supplier - who wouldn't have to charge the "offshore" company VAT either? Or should his UK company really be charging the "offshore" company VAT when it (re-)sells its services?

From what I remember, goods and services can be transferred between 2 companies without VAT being charged, if they are under common control. It seems the chap has been clever and has found a nice loophole!

I wondered that :-)

Yes but - petty emotional issues aside - it would be best to find out if it was actually legal otherwise it could have negative future implications. It seems a bit too good to be true. If it is legal then it is a very good idea.

Because the offshore company isn't in it for profit, it's a stooge acting as a stepping stone to re-import what company A has exported.

You don't charge VAT on exports. On the other hand, this is a bit of grey area. Were the dealing in goods as opposed to services, things would be a bit more transparent. It's a pity the OP started the labelling in the middle. The position AIUI is:

Company Z sells to company A. Z charges A VAT. A reclaims the VAT. A exports to company B (no VAT chargeable). Company C re-imports the goods from B. At this point C ought to pay VAT to Customs. But how are Customs to know, especially if the goods never physically leave the country? Illegal, of course, even if they don't find out.

Unlike goods, however, services don't really lend themselves to being passed down the line like that, never mind being exported and re-imported. It would seem that in reality Z is supplying the services to C, with our man Graeme at the helm of A and B acting as a muddleman in the billing chain, charging his clients 25% mark-up for the "service" of saving them

What is the service involved. It makes a big difference.

I liked the way "Company A" just popped up without any definition!