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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

MAY 2015 - Think you know about carousel fraud?

Carousel Fraud first came to the public (and HMRC’s) attention around 2005, when it cost Britain an estimated £2-3billion in potential lost tax revenue.  Britain remains the main target within Europe for Carousel Fraud, most likely due to the fact that it is an island nation and has a large number of ports and airports from which goods may be ‘imported’ and ‘exported’.

Carousel fraud, also called missing trader intra- community (MTIC) fraud, is the theft of VAT from the government(s) by organised crime gangs.  These gangs exploit the way VAT is accounted for as part of cross border trading, where the movement of goods between different countries is VAT-free.  The fraudsters import goods VAT-free from EU and non- EU countries, sell the goods to UK domestic buyers and charge them VAT, before disappearing from the UK, or the VAT system, without paying the VAT to the UK government

In some cases the scam is more complex and more reflective of the title ‘carousel’ fraud.  In these instances goods are imported VAT-free to the UK but are never sold for consumption in the UK market. The goods are instead sold through a series of companies, with each sale being liable to VAT, before ultimately being exported from the UK, in some instances back to the original supplier.  Not every buyer and seller in the chain will be aware that they are involved in a carousel chain and the fraud can be notoriously difficult to prove, with high volume returns for fraudsters in a short period of time.

Today, carousel fraud is estimated to cost the British economy between £16-26 billion per year and some analysts think it is might be even more than this. Many people think carousel fraud only relates to computer chips and mobile phones. In the past, this was largely true and this resulted in special VAT rules being introduced for the computer hardware and phones sector (including certain accessories) where businesses may find themselves jointly and severally liable for missing VAT undeclared by another party in a carousel chain, if due care and attention in checking suppliers and customer’s details was not completed.

Carousel Fraud Products

•    Mobile phones
•    MP3 players
•    Mobile phone parts
•    Computer chips
•    Cans of soft/fizzy drinks including Red Bull
•    Razor blades
•    Kidney dialysis equipment
•    Computer software
•    Luxury cars
•    Soap powder
•    Garden furniture
•    Carbon trading
•    Telecoms time trading
•    Precious metals
•    Copper & nickel cathodes
•    Scrap metal – nickel, tin, copper
•    Perfumes
•    Precious stones
•    Alcohol testing strips,
•    Urine testing strips
•    Irrigation hose
•    Emissions allowances
•    Cadbury's Creme Eggs

Today, the type of products which are known to be targeted by carousel fraudsters has grown significantly to include such widely differing items as luxury cars and Cadbury Creme eggs!  A list of the known items currently known to be targeted by this type of fraud is outlined above and it is clear that where there is sufficient market interest in a product there is also a potential window of opportunity for the willing fraudster!  With this in mind it is worth being cautious when dealing in these and any other ‘high demand’ products and bear in mind the old adage that if it seems to good to be true, it probably is!