Is this tax evasion?
Discussion
Cunning scheme for a bit of tax avoidance, or obvious tax evasion?
Person A wants to buy an item worth £400 from the US.
Person A operates his own business, and has a contract with a logistics company for shipping.
A sends over the entire cost of the item to Person B, a friend living in the US. He send this by PayPal as a gift.
B then pays the manufacturer of the item, & takes delivery.
A now speaks to his logistics company, and they collect the item from B.
I assume* the logistics company ask what the item is, A tells them it's a second-hand gift.
Item gets imported into the UK, no VAT or import duty to pay as it's a second-hand item.
A takes delivery.
A believes this to be entirely legal as he gifted money to a friend, who then sent him over a completely unrelated second-hand item as B was the original owner. Logistics company then do what A tells them to do, i.e. pick up and deliver it here, and A pays whatever charges the logistic company asks for, thereby putting the onus on them to make sure the legal tax is paid as they brought the item over.
So, fellow men of wisdom on PH, what say thee? Genius, or easy pickings for HMRC?
Person A wants to buy an item worth £400 from the US.
Person A operates his own business, and has a contract with a logistics company for shipping.
A sends over the entire cost of the item to Person B, a friend living in the US. He send this by PayPal as a gift.
B then pays the manufacturer of the item, & takes delivery.
A now speaks to his logistics company, and they collect the item from B.
I assume* the logistics company ask what the item is, A tells them it's a second-hand gift.
Item gets imported into the UK, no VAT or import duty to pay as it's a second-hand item.
A takes delivery.
A believes this to be entirely legal as he gifted money to a friend, who then sent him over a completely unrelated second-hand item as B was the original owner. Logistics company then do what A tells them to do, i.e. pick up and deliver it here, and A pays whatever charges the logistic company asks for, thereby putting the onus on them to make sure the legal tax is paid as they brought the item over.
So, fellow men of wisdom on PH, what say thee? Genius, or easy pickings for HMRC?
- I have to assume at this point, as this is the only bit where Person A is a bit fuzzy with the details.
Ekona said:
A believes this to be entirely legal as he gifted money to a friend, who then sent him over a completely unrelated second-hand item as B was the original owner.
And you have to ask if this is dodgy...?It's simple.
Would B send A the "gift" of the item if A wasn't sending him the "gift" of money?
Would A send B the "gift" of money if B wasn't sending him the "gift" of the item?
If not, then if A was honest about buying this item, would he be liable for import duty and/or VAT? Whether it's new or used is irrelevant.
If so, then of course this "gift" b
ks is an utterly transparent evasion scam.Ekona said:
Cunning scheme for a bit of tax avoidance, or obvious tax evasion?
Person A wants to buy an item worth £400 from the US.
Person A operates his own business, and has a contract with a logistics company for shipping.
A sends over the entire cost of the item to Person B, a friend living in the US. He send this by PayPal as a gift.
B then pays the manufacturer of the item, & takes delivery.
A now speaks to his logistics company, and they collect the item from B.
I assume* the logistics company ask what the item is, A tells them it's a second-hand gift.
Item gets imported into the UK, no VAT or import duty to pay as it's a second-hand item.
A takes delivery.
A believes this to be entirely legal as he gifted money to a friend, who then sent him over a completely unrelated second-hand item as B was the original owner. Logistics company then do what A tells them to do, i.e. pick up and deliver it here, and A pays whatever charges the logistic company asks for, thereby putting the onus on them to make sure the legal tax is paid as they brought the item over.
So, fellow men of wisdom on PH, what say thee? Genius, or easy pickings for HMRC?
That's tax evasion, sorry.Person A wants to buy an item worth £400 from the US.
Person A operates his own business, and has a contract with a logistics company for shipping.
A sends over the entire cost of the item to Person B, a friend living in the US. He send this by PayPal as a gift.
B then pays the manufacturer of the item, & takes delivery.
A now speaks to his logistics company, and they collect the item from B.
I assume* the logistics company ask what the item is, A tells them it's a second-hand gift.
Item gets imported into the UK, no VAT or import duty to pay as it's a second-hand item.
A takes delivery.
A believes this to be entirely legal as he gifted money to a friend, who then sent him over a completely unrelated second-hand item as B was the original owner. Logistics company then do what A tells them to do, i.e. pick up and deliver it here, and A pays whatever charges the logistic company asks for, thereby putting the onus on them to make sure the legal tax is paid as they brought the item over.
So, fellow men of wisdom on PH, what say thee? Genius, or easy pickings for HMRC?
- I have to assume at this point, as this is the only bit where Person A is a bit fuzzy with the details.
Ekona said:
I assume* the logistics company ask what the item is, A tells them it's a second-hand gift.
Item gets imported into the UK, no VAT or import duty to pay as it's a second-hand item.
Whoa, tiger! HMRC are well aware of the 'gift' try on. Item gets imported into the UK, no VAT or import duty to pay as it's a second-hand item.
https://www.gov.uk/goods-sent-from-abroad/gifts
https://www.gov.uk/goods-sent-from-abroad/tax-and-...
Nor are second hand goods exempt per se.
No idea where
https://www.gov.uk/goods-sent-from-abroad/overview
https://www.nibusinessinfo.co.uk/content/calculati...
Is your £400 'gift' new or second hand? If the latter HMRC will assess the 'gift' at what it considers to be its market value.
It is the importer who is liable for customs duty and VAT. If
HMRC don't take prisoners.
around with them at O/T. Still got your Mk3 MR2? -
Edited by Red Devil on Wednesday 7th December 16:24
Edited by Red Devil on Wednesday 7th December 16:27
Ekona said:
Person A operates his own business, and has a contract with a logistics company for shipping.
Does he import a lot of stuff, so it was likely this was in a consignment with other goods? The duty may well have got "lost" in a bigger invoice to his company.We get stuff shipped as samples from US manufacturers and it's a bit random whether we get charged or not.
Red Devil said:
O/T. Still got your Mk3 MR2? -
Sadly no, sold it in the summer as I needed the funds to mod the current 645ci. Cracking little thing it was, lucky I sold it to a mate who I still see, so will get the chance to drive it occasionally Person A is definitely not me
He's not bought the item yet, so this is all a bit hypothetical, however he seemed pretty convinced that it's all perfectly above board. I had my doubts, so figured I'd go in armed with back up 
Ekona said:
Red Devil said:
O/T. Still got your Mk3 MR2? -
Sadly no, sold it in the summer as I needed the funds to mod the current 645ci. Cracking little thing it was, lucky I sold it to a mate who I still see, so will get the chance to drive it occasionally 
- I still have Frank's Mk2: over 7 years now. - 
Ekona said:
Person A is definitely not me He's not bought the item yet, so this is all a bit hypothetical, however he seemed pretty convinced that it's all perfectly above board. I had my doubts, so figured I'd go in armed with back up
He's not bought the item yet, so this is all a bit hypothetical, however he seemed pretty convinced that it's all perfectly above board. I had my doubts, so figured I'd go in armed with back up 
I have amended my post accordingly. Depends on his appetite for risk I guess. I would rather sleep easy at night... Ekona said:
Person A is definitely not me He's not bought the item yet, so this is all a bit hypothetical, however he seemed pretty convinced that it's all perfectly above board. I had my doubts, so figured I'd go in armed with back up
Ask him if he's happy about the government "austerity" cuts to public services, or if he'd rather have fewer potholes in the road. He's not bought the item yet, so this is all a bit hypothetical, however he seemed pretty convinced that it's all perfectly above board. I had my doubts, so figured I'd go in armed with back up The only legitimate scheme like this is to buy a £10k Rolex from Thailand as the market value when it arrives in the UK will be zero
Can't believe anyone thought this was a cunning plan that would work.
As an aside, what would you declare its value for insurance to be? Would you want to take the risk?
Can't believe anyone thought this was a cunning plan that would work.
As an aside, what would you declare its value for insurance to be? Would you want to take the risk?
Ekona said:
Cunning scheme for a bit of tax avoidance, or obvious tax evasion?
... A believes this to be entirely legal as he gifted money to a friend, who then sent him over a completely unrelated second-hand item as B was the original owner...
So, fellow men of wisdom on PH, what say thee? Genius, or easy pickings for HMRC?
The Revenue would regard this, if they had knowledge of it, as an artificial arrangement the sole purpose of which is to avoid the relevant duties and VAT. And, if they could demonstrate that the UK resident was complicit in this arrangement and had designed the scheme with the deliberate intention of avoiding UK tax, and surely they could do so quite easily if they chose to initiate an enquiry, then they would regard it as a case of tax evasion and would seek some form of penalty or confiscation or prosecution, dependent upon how severe they considered the criminality involved.... A believes this to be entirely legal as he gifted money to a friend, who then sent him over a completely unrelated second-hand item as B was the original owner...
So, fellow men of wisdom on PH, what say thee? Genius, or easy pickings for HMRC?
Most advocates of this type of scheme will be relying on the Revenue not finding out. Not a sensible approach if I may say so.
But, the really serious consequence, if the scheme is "discovered" by the Revenue, is that they will ask the question... "how many times has this happened before and of which we have been unaware". Protestations of innocence along the lines of... "this is the first time I've ever done this, honest", will fall on deaf ears and earn the response... "that's what everyone says, sir". The Revenue can go back over six years of accounting records, longer if deliberate tax evasion is suspected. Does the creator of this scheme really want the Revenue going back over six years of accounting records examining every transaction with a fine tooth comb? I don't think so. Even if they find nothing it will be a very expensive and uncomfortable experience. They will look at everything from VAT returns, PAYE records, purchases, sales, Directors' benefits-in-kind, etc, etc; the enquiry won't be limited to just looking for similar import duty avoidance schemes. The Revenue will now consider all of his accounting records as being unreliable. It would be a complete nightmare.
As has been said, you'll get charged on fair market value so marking it as a gift won't achieve what is hoped.
On a £400 item you'll get (from experience) charged an additional 25%, comprising duty, VAT, and whatever fee the logistics company decides to charge you for sorting that out.
On a £400 item you'll get (from experience) charged an additional 25%, comprising duty, VAT, and whatever fee the logistics company decides to charge you for sorting that out.
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