Carousel fraud has not gone away

Opinion

Carousel fraud has not gone away

It's just been reported that HMRC have seen carousel fraud, otherwise properly known as Missing Trader Intra-Community fraud, appear in the wholesale gas and power markets.

As a reminder, MTIC fraud occurs when high value VAT liable goods are imported VAT free and then sold through a series of contrived deals, with VAT being charged on each transaction. HMRC loses VAT revenue when the VAT on the initial sale within the UK is not paid.

With the move into other markets, it's a good time to remember to be alert to this type of fraud, which if you are exposed to, could cost you dearly.

Fundamentally, you need to undertake due diligence with those you trade with. You need to check new arrivals in your market, watch for patterns of increasing size or frequency of transactions, and look out for prospective buyers and sellers coming to you at the same time.

HMRC say that they can help remove risk as they have a VAT Validation Service, can help with a 'know your client' procedure and may be able to help advise on fraudulent activity and names known to be active.

Make a mistake and you stand to lose the VAT on items you have bought in.

This was first published in October 2010

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