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By | Kelly Fiveash 19th March 2007 16:42

HMRC gets new tool to battle VAT fraud

'Reverse charge' gets green light

Computer chips and mobile phones will be subjected to a "reverse charge" VAT regime from June 1 this year in a bid to slash missing trader fraud.

Her Majesty's Revenue and Customs (HMRC) said the reverse charge system should remove the ability "to steal VAT on business-to-business transactions", effectively preventing Missing Trader Intra-Community (MTIC) fraud - or "carousel fraud" as it is more commonly known - on certain goods.

The bypassing of VAT payments when trading in small goods such as mobile phones and computer chips cost the British taxpayer an estimated £3bn last year, according to figures from HMRC.

Under the reverse charge scheme, VAT will only be accounted for at the end of the supply chain, removing the opportunity for fraudsters to scam the revenue.

HMRC spokesperson Sandra McKay told the Reg that a combination of "improved intelligence alongside more staff committed to combating VAT fraud" has led to a downturn in such illegal trading in recent months.

However she said she was unable to speculate whether other goods could now be targeted by VAT fraudsters given that the reverse charge measures apply only to mobile phones and computer chips.

Paymaster General, Dawn Primarolo MP said: "The 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." ®

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