You finally hit that big milestone.
The business is growing, your accountant says it is time to register for VAT, and the VAT number arrives. You log into your Government Gateway account to add VAT and get everything set up.
Error:
“This VAT number is already assigned to another Government Gateway account.”
You have never seen that account. Your accountant has never seen that account. Yet as far as HMRC’s system is concerned, someone else got there first.
That is the VAT registration scam in a nutshell. It is aimed at HMRC, but it is British SMEs that live with the fallout.
When you register for VAT, HMRC issues a VAT number. To manage it online, you need to add VAT as a service to your Government Gateway account.
Normally it goes like this:
Criminals are exploiting the small gap between steps 1 and 3.
They somehow obtain the VAT registration details for newly registered businesses. No one outside HMRC is entirely sure how. It might be intercepted post, compromised email or data leaking from somewhere else. However they get it, the next steps are simple.
You discover the problem when you try to add VAT and the system tells you the number is already assigned.
Your VAT account has been hijacked before you have used it once.
Technically the fraud is against HMRC. In reality, small businesses pick up the operational and emotional cost.
Most SMEs do not have a tax department. Post might sit for a few days. Emails get skimmed on a phone between meetings. Logging into Government Gateway to add VAT is exactly the sort of task that gets pushed to “next week”.
Fraudsters are counting on that short delay. If they act within a day or two of HMRC issuing the number, they can often beat the real business to its own VAT account.
Many businesses register for VAT while they are investing heavily. The first VAT return is often a repayment, which can be a useful cash injection.
If a criminal files a fake repayment return first, that period is tainted. HMRC will freeze things while they investigate. The money you thought you would get back sits in limbo. For a small business that is working with tight cash flow, that is not a small inconvenience.
Most SMEs sensibly rely on accountants for VAT. The problem is that agent authorisation often trails behind registration.
There is usually a short period where:
Fraudsters do not have this confusion. They see a fresh VAT number and act immediately.
Once a criminal has attached your VAT number to their Government Gateway, normal life stops.
You and your accountant may find you cannot:
What should be a clear digital view becomes a black box.
While HMRC investigates, your real business carries on.
You raise invoices, collect VAT, pay VAT on costs. On paper, nothing has changed. Online, your VAT account is stuck.
The result is a backlog:
That often leads to a single large VAT payment due in one go, rather than the normal quarterly rhythm.
There is also the mundane grind.
For a small team, that time usually belongs to the founder or a single finance person. It is time not spent winning work, serving clients or improving the business.
This is where the scam really hurts.
Well run SMEs put VAT aside in a separate account. When you cannot actually pay HMRC because the account is frozen, the advice is still to keep ring fencing the money as if you were filing normally.
So every month you move VAT out of your current account into a pot you cannot use, to pay a bill you cannot yet settle, on a timetable nobody can explain.
Meanwhile, costs carry on. A big order comes in, a client pays late, the energy bill spikes. The temptation to dip into that VAT pot “just this once” is very human.
That is the trap. When HMRC finally unblocks the account and you can file several quarters in one go, the money might not all be there.
Even if you never touch the VAT cash, uncertainty affects your choices.
All because your VAT account is stuck in a fraud queue.
Once HMRC’s system thinks you have missed returns, the automated letters start.
They often use firm language. It is not pleasant reading phrases like “failure to comply” and “further action may be taken” when you know you have been blocked from filing.
In theory, once HMRC accepts that fraud has occurred, surcharges and penalties should be cancelled. In practice, those letters can keep arriving until the case is fully resolved. You are left with a pile of official-looking threats you are told to ignore.
There is also the quiet worry at the back of many owners’ minds:
Most SMEs did not sign up to become case studies in digital tax fraud handling. They simply wanted to register for VAT and carry on.
You cannot eliminate the risk entirely, but you can narrow the window fraudsters can exploit.
Treat that as a high priority, not a “whenever I get to it” task.
As soon as you receive your VAT number:
If you see an error saying the VAT number is already assigned, treat it as a red flag, not a temporary glitch.
On the same day:
Then, with your accountant:
It is boring, but it makes life easier when HMRC finally clears the account.
The uncomfortable truth is this: your Government Gateway login now matters almost as much as your online banking.
It controls access to VAT, PAYE, corporation tax and more. If someone else reaches your VAT number before you do, the consequences are messy, even if HMRC eventually fixes everything on paper.
So give yourself one simple rule:
The day you receive your VAT number is the day you lock it down.
Log in. Add VAT as a service. Confirm it is really yours. Tell your accountant it is done.
It is a small, dull task. It also might be the easiest bit of fraud prevention your business ever does.
If you would like any guidence on how to move your business forward, G&G has the necessary skillset to help you manage your business more efficiently and more profitably. if you would like some assistance, please dont hesitate to contact us.
From business planning or Business Administration to assisting with your organisations growth, we are happy to advise and help where we can. Get in touch to start your no-obligation consultation!
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