back to article HMRC: Aria PC's £2m MSN Messenger deals bonanza was VAT fraud

Reseller Aria PC's managing director "must have known" that 11 disputed deals his company made a decade ago had a "connection to fraud", an HMRC barrister has told a tax tribunal. Aria PC is accused by HMRC of playing a key part in a missing trader intra-community fraud, also known as VAT carousel fraud. In 2006 the company …

  1. Anonymous Coward
    Anonymous Coward

    Superman II

    Smart enough to try something dumb, dumb enough to flash the cash around afterwards.

    I always wondered how he could afford some of the shiny stuff he kept showing off, especially at a time that competition was cut-throat and people charging pennies more for the same product were going to the wall.

  2. Jellied Eel Silver badge

    Honest brokers

    I don't normally read through this kind of legal document, but it's strangely fascinating. As seems the role of FCIB in potentially facilitating this kind of fraud.

    Some of the arguments seem a little unfair. So sales person doesn't know what a 7074 is. Me neither, but it might be a chip for RDS radios. I also know that sales often don't understand what they're selling, but if they can earn commission on it, they'll try. I'm also glad I'm not in the commodities/brokerage business as it looks like it's easy to be left holding the VAT bill. I don't see it as unusual for large deals to get done fast, ie you're connecting buyer & seller and don't want to tie up cash or pay freight fees. But HMRC's investigations show hundreds of millions in trades to entitities I wouldn't have traded with given a bit of due diligence. The role of FCIB is also interesting & para 353 saying the same IP addreses were used by participants, but Aria wouldn't have known that.

    TL;DR for me though is that if HMRC warns you to do due diligence carefully due to MTIC fraud in your sector, it'd be diligent to do so.

    1. MonkeyCee

      Re: Honest brokers

      "Some of the arguments seem a little unfair."

      Not sure I agree with you there. Most seem pretty reasonable.

      The retail side of Aria seems fairly legit, turning over 4-5 million a year with a hundred or so staff. There exist pretty clear business procedures for that, which seem to follow the normal chain of events. So wholesale stock is ordered, arrives at warehouse, gets checked, then gets sold in retail sized lots with the customer fronting up the money.

      The "wholesale" deals were for significant amounts of money, the goods never went to the company warehouse, never checked by any employee, no contracts were signed, and the goods were onsold within a very short period of time, and ownership was transferred without payment or contract. Neither of the three chaps at Aria who were involved in the deal will take ownership of it.

      As I understand it, if you are a retailer, then you don't have to worry overmuch about MTIC, as long as your suppliers are reputable. But as soon as you start wholesaling then you have to be responsible for the whole supply chain back to the manufacturer.

      1. Jellied Eel Silver badge

        Re: Honest brokers

        The "wholesale" deals were for significant amounts of money, the goods never went to the company warehouse, never checked by any employee, no contracts were signed, and the goods were onsold within a very short period of time, and ownership was transferred without payment or contract.

        That part to me seems believable. Or commonplace, ie commodities traders like oil could mean a tanker's contents change ownership many times whilst it's on it's way. But I assume if that's via an exchange, the deals are all logged and auditable. If deals get done off-exchange, I guess it's less certain.

        I could see the same thing happening with PC components, especially CPUs, ie someone is a system builder, or wants to be one and needs a pile of CPUs. That may be more than you've got in inventory so you broker a deal, and the transaction happens fast. The deals did seem to get recorded, ie the massive reported revenues from the wholesale side. And I think it's reasonable that those deals get done based on a contacts list of people who may be able to source stuff, in various shades of grey.

        Problem for me is if a sales guy came to me with those deals, I'd be rather dubious about the parties listed, and why they wanted stuff in such huge volumes when a lot of them didn't look like 'trade' customers.. Especially if I also knew we may get lumbered with a large VAT bill. Without that risk, or diligence, it'd look like a quick trade and easy money from the margin.

        I guess HMRC's challenge is proving intent and that Aria should have known, or suspected these deals were shady. At the very least though, the exec team at Aria should have made sure they understood the risk given the deal sizes.

    2. Anonymous Coward
      Anonymous Coward

      Re: Honest brokers

      If HMRC are resorting to using phrases like "must have known" and "ought to have known" it suggests that they haven't actually got any proof and that, sans evidence, they think that their belief alone should be sufficient grounds for a ruling.

  3. Anonymous Coward
    Anonymous Coward

    i'd like to see the day the Taxman asks the court to view the Appellants case with sensitivity, compassion and humanity.

    1. Anonymous Coward
      Anonymous Coward

      ..that or the day they were judged by the same standards they try to judge others.....

      1. Kevin Johnston

        What you mean possibly how they came to sell off their own offices to a Bermuda-based investment copmany and then lease them back to save tax? That sort of standard?

  4. Mike Shepherd

    HMRC crookery

    It's worth remembering that HM Customs and Excise (responsible for VAT) was basically shut down and forced to merge with the Inland Revenue following their "billions" in deliberate losses and subsequent crookery (lying) in court. See, for example, Panorama "Nothing To Declare" 23rd March 2005.

    Hence the new name "HM Revenue and Customs".

    Have they changed? It seems unlikely.

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