The accounting industry has welcomed the British government's decision to seek permission from the European Commission to amend the VAT rules, in order to stamp out ‘Missing Trader Intra-Community’ (MTIC) fraud, and has pledged to assist the authorities in their bid to eliminate the scam.
Last week, Paymaster General Dawn Primarolo announced that the government is seeking a derogation from EU law to enable it to introduce a reverse charge procedure for transactions between VAT registered businesses in certain goods.
The move is designed to thwart fraudsters from exploiting the VAT rules allowing them to buy goods from other EU countries without having to pay VAT and selling them on with the VAT added, after which they disappear without having paid the requisite VAT to the government.
It is estimated that missing trader fraud cost the government between GBP1.1 billion and GBP1.9 billion in lost revenues during 2004/5.
“As professionals, we are completely against all fraud and have been very concerned about this particularly pernicious exploitation of the UK VAT system," Francesca Lagerberg, Chairman of the ICAEW Tax Faculty, stated.
The Institute says that it intends to work closely with the government and HM Revenue and Customs to help eliminate missing trader fraud, and has recommended some "practical steps" that can be taken to discourage the fraud and to ensure that innocent third parties and advisers do not unwittingly become involved in facilitating such activity.
"We have already expressed to HMRC our willingness to help consider implementation issues - the main ones are likely to be definitions, the impact on cash flows and systems changes, together with the implementation date – and are exploring with HMRC whether some joint guidance would be helpful," explained Ms Lagerberg.
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