Her Majesty's Revenue and Customs is not seeing a stampede of fraudsters hitting carbon trading as a new way to commit carousel fraud, or missing trader intra-community fraud.

Classic MTIC fraud involves buying and apparently importing goods from another EC country, so no VAT is charged. These are then sold on, with VAT added, then the company disappears before it pays the VAT back to the Revenue. Traditionally the fraud focussed on computer chips and mobile phones, because they are high value goods which can be easily shifted around. The same goods, which only need to exist in paper form, can be moved several times between countries.

Carbon credits are also high value, traded internationally and subject to VAT.

The Revenue said it was monitoring the trade, but is yet to see a big move to carbon credit carousel fraud.

A spokesman for the Revenue said: "This fraud is possible with any VAT-rated goods and we have identified carbon credits as a possible target, but we're not seeing any exodus from normal carousel fraud."

The spokesman added: "We take the ever-present threat of fraud very seriously and Her Majesty's Treasury and Her Majesty's Revenue & Customs are accordingly monitoring the situation in the UK carefully. We are considering our options for countering any fraud that emerges in the UK involving carbon credits, and will continue to engage constructively in EU level anti-fraud work."

Carousel fraud has been a huge problem in the UK, but HMRC's declared successful targetting of the fraudsters' favourite offshore bank, and declared changes to EC VAT rules, have helped reduce it. ®