As of 1st June 2007, VAT-registered customers buying these goods
are required to pay the VAT on the sale to Her Majesty's Revenue
and Customs (HMRC). VAT is paid to the supplier in most
transactions. The move is designed to help combat what is known as
MTIC (Missing Trader Intra-Community) fraud.
MTIC fraud is committed by obtaining VAT registration to acquire
goods VAT free from other Member States. The fraudsters then sell
on the goods at VAT inclusive prices and disappear without paying
over the VAT paid by their customers to the tax authorities.
A variant of MTIC fraud known as carousel fraud occurs when
goods that have been imported into the UK are sold through a series
of transactions before being re-exported to another EU Member
State. They may then be re-imported back into the UK.
The new accounting scheme is known as the "reverse charge" and
it removes the mechanism by which fraudsters steal VAT. The process
is targeted at mobile phones, computer chips, cameras, MP3 players
and memory cards, as these are the goods most commonly used in MTIC
fraud.
"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," said Mike Eland, HMRC director general of enforcement
and compliance. "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," he said.
