New VAT Accounting Regime Put In Place In UK

by Jason Gorringe, Tax-News.com, London

05 June 2007

A new way of accounting for VAT took effect on Friday 1 June which changes the way VAT is paid on mobile telephones and computer chips, in a measure designed to combat fraud in these goods.

From Friday, VAT-registered customers for these goods are required to pay the VAT on the sale to HMRC, as opposed to the supplier - which is the norm in most transactions. The move is designed to help combat what is known as MTIC (Missing Trader Intra-Community) fraud - also known as carousel fraud.

This accounting scheme is known as the "reverse charge", and it removes the mechanism by which fraudsters steal VAT when trading in certain types of goods. The process is targeted at mobile telephones and computer chips, as these are the goods most commonly used in MTIC fraud.

Mike Eland, HMRC Director General Enforcement & Compliance explained that:

"MTIC fraud is a serious criminal attack on the tax system which diverts vital resources away from the UK's public services into the pockets of organised criminals and we are absolutely committed to stopping it. Already our strategy has significantly reduced the level of attack, and we continue to track down and prosecute those behind the fraud as well as targeting others who choose to profit from it".

"The fraud is becoming increasingly sophisticated and complex. HMRC have further strengthened their strategy for tackling MTIC over the past few months, and the reverse charge will be an important tool in combating it."

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