asked Her Majesty's Government:
Whether they are aware of any missing trader and carousel fraud outside the mobile phone industry; and [HL2569]
Whether HM Revenue and Customs have withheld VAT repayments to the majority of mobile phone traders since March 2006; and [HL2570]
How many mobile phone traders have sought judicial review of the withholding of VAT payments; how many cases have been initiated; and how many are pending; and [HL2571]
Whether they have taken action in respect of missing trader and carousel fraud against any mobile phone traders; and, if so, in respect of how many traders. [HL2573]
Although the majority of all MTIC fraud seen so far has been perpetrated using mobile phones and computer chips, a wide range of other goods have been, and continue to be, used. HMRC has also seen evidence of traders historically linked with the mobile phone sector diversifying their trading into goods as disparate as cosmetics and soft drinks.
HMRC has a duty to protect tax revenues, and does so through a multi-faceted strategy using a range of interventions, including taking steps to counter inaccurate, fraudulent or abusive repayment claims. HMRC is entitled to verify VAT repayment claims to ensure that they are properly payable. Decisions to verify repayment claims or to take other action to improve taxpayer compliance are made on the basis of perceived risk and are applied across the whole VAT register.
Last year, the level of VAT repayment claims from those suspected of trading in supply chains associated with MTIC fraud rose very rapidly, without known economic or commercial reason. As a result, HMRC is verifying a greater proportion of VAT repayment claims from such traders, regardless of the nature of their trading activity. In order to ensure that its action is proportionate, HMRC has deployed an additional 700 staff to enable these verification checks to be carried out efficiently and effectively. However, HMRC does not collate information by specific products, and to do so would incur disproportionate costs.
HMRC has received a number of challenges to its in-depth verification of repayment claims from those suspected of trading in transaction chains affected by MTIC fraud. HMRC has received over 170 letters before claim, the first stage in the judicial review process. Subsequently, HMRC has been served with 42 judicial review claim forms. Of these, 19 cases are awaiting a decision from the administrative court as to permission, and two substantive and two permission renewal hearings are pending. The courts, to date, have supported HMRC's policy and practice.