Reverse charge ' the answer? By Rebecca Benneyworth
Enabling legislation is included in this year's Finance Act to require traders selling certain goods to account for VAT under the reverse charge procedure. The change is intended to reduce, or it is hoped eliminate, missing trader fraud, which is currently costing around £2 billion a year in lost tax.
Tax is lost when traders purchase goods which are exported to the EU, reclaiming their VAT on the purchase, as the sale is not liable to UK VAT as an EU export. The loss of tax arises because the business supplying the goods disappears without accounting for the output tax on the sale.