UK Customs Crackdown Leads To Drop In Imports From EU

by Robin Pilgrim, LawAndTax-News.com, London

11 September 2003

Figures released this week by the UK's National Statistics Office (ONS) have revealed that a Customs and Excise crackdown on 'missing trader' or 'carousel' VAT fraud has led to a substantial drop in trade between the UK and the EU.

The ONS announced on Monday that between May and July 2003, imports of capital goods from the European Union dropped £1.3 billion compared with the previous three months. The Office also revealed that exports of capital goods fell during the same period by around £1.2 billion.

In order to execute the missing trader scam, which is most commonly found in the computer, mobile phone, alcohol, and fuel sectors, a UK VAT registration must be obtained in order to acquire goods VAT free from other EU member states. The goods are then sold on at VAT inclusive prices, following which the fraudster disappears without paying the VAT back to the UK government.

The 'carousel' element comes into play because the goods are then sold to a buyer in another member state - often the original exporter - for less than the price paid to the original seller.

However, last month, Customs and Excise revealed that, from August 21st, it would be applying new rules to the aforementioned sectors.

These stipulate that firms which do not have a valid VAT invoice will not be able to claim back the tax unless they can prove that they took 'reasonable steps' to ensure that their supplier was genuine, and that where a business in the mobile phone or computing sector has reason to suspect that a link in their supply chain will default on their VAT payment, they may be obliged to pay the amount themselves.

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