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Taxation: VAT Carousel Fraud

Volume 689: debated on Tuesday 20 February 2007

asked Her Majesty's Government:

Why HM Treasury takes the view that value added tax carousel fraud transactions have effectively ended. [HL1966]

The Government published estimates alongside the 2006 Pre-Budget Report, showing that levels of attempted MTIC fraud in the UK grew significantly during 2005-06, to between £3.5 billion and £4.75 billion, with a consequent impact on the in-year VAT receipts of between £2 billion and £3 billion. In response to this increase, HMRC has strengthened its operational strategy, increasing the level of criminal investigations with international partners in Europe and beyond and re-deploying over 700 extra compliance resources in order to check a greater number of suspect VAT repayment claims submitted by those operating in supply chains known to be associated with MTIC fraud.

Operational indicators in the current financial year suggest that HMRC's response has led to a dramatic reduction in MTIC activity. The latest monthly balance of payments statistics published by the Office for National Statistics, using trade data supplied by HMRC show that trade in MTIC-related goods has fallen by over 90 per cent since April 2006.