The BBC journalist Colin Campbell went undercover as a self employed builder in order to uncover the illegal trade in receipts. These are then used as evidence to defraud HMRC of both VAT and income tax paid through self assessment. He focuses his report on dealers on Polish websites that are based in the UK.

Why are people paying for receipts?

This isn’t a couple of receipts to prove the purchase of a couple of items. It is whole folders of genuine receipts that have been paid in cash and do not have company, or individual, names on them. One of the rogue traders in the footage says that they are selling receipts worth between £10,000 and £20,000.

Several of the men secretly filmed, used the fact that they had sold receipts in the past and people had used them as evidence with HMRC “without any problems” as a main selling point.

But how does this help people pay less tax?

Your taxable income is worked out by HMRC. It involves taking the total of your expenses away from the total you earn, and the remainder is what is taxable. The more business expenses you have, the more you take off your taxable income figure and the less tax you pay to HMRC.

So, if you buy a folder of receipts that show you have spent £15,000, you get away without paying tax on that £15,000. This applies to the self assessment and the VAT system. Basically, these receipts are the proof you need to scam HMRC.

If you are paying Basic Rate tax of 20%, then reducing your taxable income figure by £15,000 saves you £3,000 on your total tax bill. (20% of £15,000).

And that’s just one individual example. HMRC is being defrauded of tens of thousands of pounds in this way.

Chartered Institute of Taxation (CIOT) reaction

In a BBC interview, Richard Wild of the CIOT, says: “It’s a crime because what it’s doing is enabling people to reduce their tax bill and their VAT bill illegally. Because they haven’t actually incurred the expenses they’re going to claim for.”

A very clear statement of the criminality of such actions. Those selling the receipts are enabling tax evasion and those using the purchased receipts are defrauding the government by presenting false evidence of non-existent expenses with the sole aim of paying less tax.

HMRC’s statement: “HMRC is committed to ensuring all companies and individuals pay the right tax at the right time and will pursue those who fail to do so.”