Government addresses carousel fraud

News Article - 23 March 2007
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The government has announced new rules designed to counter carousel fraud effective as of June 1st this year, addressing the problem of criminal activity surrounding VAT.

It has been announced that a new VAT accounting system will be applied to computer chips and mobile phone handsets. These have been identified as the most common sources of the scam, which involves the fraudulent claiming of VAT refunds.

The government's new measure, known as the reverse charge, will diminish the chances to steal VAT in a move intended to ultimately cut down on carousel fraud levels.

Under the reverse charge the supplier is not required to account for the VAT on their sales when dealing with other VAT registered parties. Paymaster general Dawn Primarolo explained the wider aims of the system.

"This is a proportionate step to safeguards taxpayers' money and means that businesses can trade in these goods without the risk of getting caught up in the fraud."

The UK has stated that it plans to work with other European governments to tackle VAT theft.

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