New measure to tackle International VAT Fraud

New rules making it harder for organised criminals to steal VAT from the UK taxpayer will be introduced on 1 June 2007.

Called the ëreverse chargeí, the measure is an important part of the Governmentís strategy to tackle Missing Trader Intra-Community (MTIC) fraud. It will see a new VAT accounting system applied to mobile phones and computer chips, which are the goods most commonly used in the fraud. By removing the opportunity to steal VAT on business-to-business transactions, it will prevent MTIC fraud in those goods.

The introduction of this measure will help to maintain the recent success of HM Revenue and Customs (HMRC) operational strategy, which has driven down MTIC related trading activity substantially in recent months.

Paymaster General, Dawn Primarolo MP said:

ìI am pleased to announce the introduction of the reverse charge, which will further strengthen the Governmentís response to missing trader VAT fraud. We are targeting the measure at the goods most commonly used in the fraud. This is a proportionate step to safeguard taxpayersí money, and means that businesses can trade in these goods without the risk of getting caught up in the fraud.

ìThe Government remains determined to tackle this fraud and the criminals perpetrating it, and we are committed to working closely with our European and other international partners to combat this serious threat to the EU VAT system.î

The Government has put in place a robust strategy for tackling MTIC fraud through a combination of legislation, litigation and operational activity. HMRC has committed 700 additional staff, and now uses over 1500 staff to identify and tackle the fraud and those involved in it.

In recent months HMRC has focused efforts on denying the fraudsters access to the proceeds of their crimes, including through checking VAT repayment claims from those trading in supply chains associated with MTIC fraud. As a result the level of trading associated with attempted fraud has fallen significantly in recent months. The Government will continue to work to maintain the downward pressure on the fraud following the introduction of the reverse charge, and will not hesitate to bring forward further measures as necessary.