Extent of South West fraud revealed

Sat Plaha

Sat Plaha

More than £45m of reported fraud was committed in the South West last year, according to BDO’s 2012 Fraud Track research published today.

The analysis from the accountancy and business advisory firm, which examines all reported fraud over £50,000, sees the cost of South West fraud more than treble in the space of just one year.

The total number of cases in the region was 46, representing more than 11 per cent of UK reported fraud, but the total cost represented just over three per cent of the UK total of £1.37bn.

Some of the most significant South West cases analysed in the BDO Fraud Track research included an elaborate fraud worth nearly £27m masterminded by a 21-year-old computer hacker who stole and sold financial data, a £4m scam by a group of 12 people using fake pay slips during a mortgage fraud racket, and two men who earned up to £350,000 from illegally clamping vehicles across the region.

Sat Plaha, Forensic Partner at BDO, said: “There is still real concern that the vast majority of both public and private sector fraud is not reported, with business owners not wanting to involve the police in such matters unless absolutely necessary.

With that in mind, the true cost to the region is likely to be much higher than £46m.”

Across the UK, the value of total reported fraud in 2012 has fallen by a third to £1.37bn. However tax fraud, totalling £603m alone, has doubled in the last two years.

The Midlands (£250m) and the North East (£172m) were the UK’s biggest regions for fraudsters outside of London and the South East (£625m).

This year’s Fraud Track figures show that VAT fraud alone accounts for 41 per cent of the total UK fraud figure.

The current UK VAT gap, the theoretical difference between what the Government expects to collect in sales tax and what it actually collects, is around £10bn with fraud accounting for approximately one third of this figure.

To put this in real terms, if a third of the UK VAT gap is due to fraud, that equates to £3.3bn missing from the public purse every year – equivalent to at least one pence off the effective rate of tax for every UK taxpayer.

This amount (£3.3bn) would pay for the winter fuel allowance, free TV licences and compensating pensioners on the pensions credit (£1.4bn) and still leave enough to build 17 new hospitals (£1.9bn/£113m).

BDO’s Sat Plaha comments, “The fact that tax fraud, and VAT fraud in particular, accounts for such a high proportion of overall fraud, is evidence that this continues to be a serious issue for HMRC, especially given that full recovery is not always possible.”

Having dominated fraud figures in the last few years the finance and insurance sector appears to have made substantial strides towards combating fraud, reporting its lowest level of fraud in five years at almost £0.5bn in 2012. Topping the tables as the industry most susceptible to fraudulent activity is public administration (£615m).