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VAT fraud arrests after dawn raid VAT fraud arrests after dawn raid
(10 minutes later)
UK customs officers have arrested 13 people on suspicion of a massive tax fraud, following dawn raids across four European countries. UK customs officers have arrested 15 people on suspicion of a massive tax fraud, following dawn raids across four European countries.
The arrests form part of the UK's push against carousel fraud, a tax evasion scam which cost the Treasury between £2bn and £3bn in 2005-6. The arrests form part of the UK's push against carousel fraud, a tax evasion scam that cost the Treasury between £2bn and £3bn in 2005-6.
HM Revenue and Customs said 300 of its investigators had taken part in raids in the UK, France, Spain and Germany.HM Revenue and Customs said 300 of its investigators had taken part in raids in the UK, France, Spain and Germany.
Of the 13 men arrested, 12 were British and one was Dutch. All but one of the men arrested was British, the other being Dutch.
The arrests took place in London, Glasgow, the Midlands and Cheshire, after the investigators executed 50 search warrants in locations across the UK.
HMRC said it expected to make further arrests as the day progressed.
"The scale of the problem across Europe is unprecedented, and HMRC has significantly strengthened its response to this serious fraud," said Euan Stewart, HMRC's deputy director of criminal investigations.
Round and round
Organised VAT fraud has become a huge issue for the UK in recent years.
The most virulent example is known as MTIC ("Missing trader intra-community") fraud, and in its simplest form involves the importing of goods from other countries in the European Union.
How the carousel works
Goods traded between EU countries are VAT-free - so the importer sells them on in a string of fraudulent transactions then re-exports them, claiming back VAT which was never paid in the first place.
RAID LOCATIONS LondonGlasgowBirminghamWolverhamptonStaffordCongletonMacclesfieldWeston, CheshireCardiffManchesterDoverBristolParisHamburgBarcelona
HMRC is obliged to pay up unless it can prove that the VAT due on the goods, when they were sold after importation, was never actually collected.
In more advanced and lucrative forms of the fraud, the same goods - usually small, high-value items such as computer parts or mobile phones - are sent over and over round a chain of trades through multiple countries.
This roundabout practice - in which the goods are often in fact non-existent and the trading automated - has led to the technique being dubbed "carousel fraud".
High cost
So far in 2006, more than £26bn worth of trade associated with the fraudulent imports and exports has been recorded by HMRC - although this has tailed off in the last few months, because of various anti-avoidance measures.
The prevalence of carousel fraud has hit UK trade statistics, as well as robbing the taxpayer of billions.
HMRC now has 1,500 staff working on MTIC fraud, and is trying to get the EU to allow a change in the VAT payment rules so that with particularly vulnerable goods, the tax is only charged in the final, retail transaction.
Since April, nine prosecutions have taken place in carousel fraud cases, following the conviction of 18 people in the previous 12 months.
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