VAT 'reverse charge' scheme kicks off

As of today mobile phones and computer chips will be subject to a new fraud-busting VAT accounting scheme called "reverse charge".

The new scheme has been introduced by Her Majesty's Revenue and Customs (HMRC) in a move to stamp out Missing Trader Intra-Community fraud (MTIC).

MTIC, which is more often referred to as carousel fraud, has proved a financial burden on taxpayers who coughed up a hefty £3bn last year.

It's a problem affecting all European member states, but unlike the UK government, few have been quick to act.

The reverse charge scheme will require VAT-registered customers of mobile phones and computer chips to pay the VAT on the sale to HMRC, as opposed to the supplier.

It is hoped that the scheme will help combat carousel fraud.

However, as we reported earlier this week, critics of the scheme argue that applying reverse charges to certain items is short-sighted and said that fraudsters could simply move on to other goods such as MP3 players and digital cameras.

HMRC director general enforcement and compliance Mike Eland said:

"MTIC fraud is a serious criminal attack on the tax system which diverts vital resources away from the UK's public services into the pockets of organised criminals and we are absolutely committed to stopping it.

"Already our strategy has significantly reduced the level of attack, and we continue to track down and prosecute those behind the fraud as well as targeting others who choose to profit from it". ®