PBR: Extra staff to tackle MITC fraud as cases shoot up. By Dan Martinby
As newly released figures show the government lost up to £3bn to carousel fraud in 2005-06, Gordon Brown’s pre-budget report revealed staff solely focused on developing HMRC’s strategy to tackling the problem will be extended to 1,500.
Published alongside Wednesday's PBR was a separate report entitled ‘Measuring Indirect Tax Losses’. Included in it was data showing attempted carousel fraud – officially known as missing trader intra-community (MITC) fraud – totalled between £3.5 and £4.75bn in fiscal year 2005-06, amounting to up to £3bn in lost VAT receipts.
HMRC said the fraud, which involves the import and export of small, high-value goods such as mobile phones and computer chips between EU states, has increased because the tactics of criminals have become more sophisticated including use of "virtual" carousels where goods do not physically move.
Over 600 extra staff have been redeployed during 2006-07 which the PBR document said has meant the “vast majority of suspect repayment claims are now subject to in-depth checking and will not be paid unless and until found to be properly payable”. Such checking has led to expressions of concern by some business experts that the trading of legitimate companies is being affected while they await confirmation of their VAT registration.
As well as those staff assessing potential fraud, the PBR said an extra 100 people will be tasked with developing HMRC’s strategy to tackle the problem, bringing the total to 1,500.
The government is also to continue negotiations with its European counterparts to introduce a reverse charge VAT accounting system for goods most commonly used in MITC fraud. HMRC wanted to bring the system in on December 1 but it was delayed after opposition from France, Germany and Austria. “Further legislative measures will be brought forward in Budget 2007 as required,” the PBR said.