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Treasury Launches New Measure To Combat VAT Fraud

by Jason Gorringe,, London

21 March 2007

The UK Treasury announced on Monday that it plans to introduce new rules making it harder for organised criminals to steal VAT from the UK taxpayer, from June 1, 2007.

Called the 'reverse charge', the measure will play an important part in the Government's strategy with regard to tackling Missing Trader Intra-Community (MTIC) fraud.

It will see a new VAT accounting system applied to mobile phones and computer chips, which are the goods most commonly utilised by MTIC fraudsters. By removing the opportunity to steal VAT on business-to-business transactions, the Treasury hopes that it will prevent MTIC fraud in those goods.

Paymaster General, Dawn Primarolo stated on Monday that:

"I am pleased to announce the introduction of the reverse charge, which will further strengthen the Government's response to missing trader VAT fraud. We are targeting the measure at the goods most commonly used in the fraud. This is a proportionate step to safeguard taxpayers' money, and means that businesses can trade in these goods without the risk of getting caught up in the fraud."

"The Government remains determined to tackle this fraud and the criminals perpetrating it, and we are committed to working closely with our European and other international partners to combat this serious threat to the EU VAT system."

According to the Treasury, the Government has put in place a robust strategy for tackling MTIC fraud through a combination of legislation, litigation and operational activity. HMRC has committed 700 additional staff, and now uses over 1,500 staff to identify and tackle the fraud and those involved in it.

In recent months HMRC has focused efforts on denying the fraudsters access to the proceeds of their crimes in several different ways, including by checking VAT repayment claims from those trading in supply chains associated with MTIC fraud.

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