Carousel fraud – a UK£1.9 billion problem

“Carousel fraud isn’t a victimless crime or a clever accounting trick, it is criminal theft of tax revenues needed to fund our country’s public services,” Carole Upshall, HMRC Detection Senior Manager. This year has seen a fundamental review by the government of how it can begin to tackle the very great losses attributed to the carousel fraud, otherwise known as a Missing Trader Intra Community (MTIC) VAT fraud. Neil Blundell of Russell Jones & Walker studies the latest developments.

Neil Blundell is a partner in the Fraud and Regulatory group at Russell Jones & Walker. He may be contacted on tel: +44 (0) 7843 411967; email: n.f.blundell@rjw.co.uk

The statistics make very unpleasant reading for both the Government and HM Revenue & Customs (HMRC), in that the period 2004/05 saw VAT losses from MTIC fraud estimated to have cost the taxpayer between UK£1.12 billion and UK£1.90 billion. According to figures from the Office of National Statistics, almost UK£10 billion-worth of export trade was associated with VAT fraud during the second quarter of 2006. This represents a 50% rise on the first quarter of 2006. Indeed the scale of the problem is such that in the Budget 2006 the Government marked out MTIC fraud in particular as a contributor to the UK£0.7 billion fall in UK VAT receipts seen in 2005/06.