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VAT fraud loopholes to be closed in tough summer crackdown

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21/03/2007

New rules to combat Value Added Tax (VAT) fraud are coming into force on 1st June as HM Revenue & Customs (HMRC) gets tough with criminals who cost the UK between £2bn and £3bn last year by ‘carousel fraud’.

Carousel fraud involves the repeated import and export of high-value goods free of VAT from other countries in the European Union. These are sold on in the UK through a sequence of false transactions which fail to pay or collect any VAT. However, when the goods finally leave the UK the fraudster claims a VAT refund.

To combat the crime, HMRC is introducing a “reverse charge” policy whereby VAT is only chargeable by the last retailer in the chain as they sell the goods to the public.

“BY removing the opportunity to steal VAT on business-to-business transactions, it will prevent fraud on these goods,” said a spokesperson for HMRC.

“We have committed 700 additional staff and now use over 1,500 staff to identify the fraud and those involved in it.”

The figures suggest that the new tougher stance adopted by HMRC is paying off as the value of the trade associated with carousel fraud has slumped in recent months, although it is estimated the Treasury has been deprived of £10bn since 2001.

 

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