Is this ethical/illegal?

[Ferestreet]

Hi
Apologies if this appears to be a silly question, I’m not very educated on VAT & my daughter has asked me if this is ok/dodgy re tax…
Her boyfriend works for a business which sells cars & they regularly use an independent garage for these cars. He has told my daughter to pay him/this business & he will put her car through a service/repair under his business name so she doesn’t have to pay VAT…
I understand he’s doing her a favour by doing this but she’s asking me if it’s acceptable for her to do and I’m really not sure. TYIA

It's a tiny bit dodgy

It’s a bit dodgy but I don’t think anyone will get into trouble for it

Its dishonest and she sounds sensible if she is questioning it

I would. Probably wouldn't worry about it either. I pay enough tax.

HMRC select companies for review at random as well as those suspected of tax fraud. Now that returns are submitted digitally, it's even more likely to be picked up, especially if it's not just her that he does it for.

The penalty would be significantly higher than any VAT savings made. It doesn't really seem worth it for the small amount of saving available.

Thank you very much for your replies. I did think it sounded dodgy trying to avoid VAT, but I couldn’t explain to her why. She is very sensible. Is this classified as tax fraud then? Her boyfriend does things like this for his friends so they don’t pay VAT, I’m not sure how it works. If anyone could explain it to me/the implications for her/his friends/the business I would be most grateful

VAT incurred in the course of business is reclaimable in the company's VAT return - but only if the item in question is a legitimate business expense. What the boyfriend is proposing is VAT fraud - if caught there will be severe repurcussions. It's also not a very sophisticated fraud as it will take the VAT inspector about 5 minutes at the next VAT check to spot that the car being repaired was never subsequently sold by the business so is not a legitimate business expense. It's really not worth taking the risk. Say no. Frankly, the boyfriend sounds a bit dodgy too for getting involved with this.

@Kitfish

VAT incurred in the course of business is reclaimable in the company's VAT return - but only if the item in question is a legitimate business expense. What the boyfriend is proposing is VAT fraud - if caught there will be severe repurcussions. It's also not a very sophisticated fraud as it will take the VAT inspector about 5 minutes at the next VAT check to spot that the car being repaired was never subsequently sold by the business so is not a legitimate business expense. It's really not worth taking the risk. Say no. Frankly, the boyfriend sounds a bit dodgy too for getting involved with this.

Kitfish thank you for the great summary. Much appreciated and I will explain this to her. She won’t get involved with anything like that and I’m pleased I’ve been able to find an answer from here. Thanks all