What is Carousel Fraud?
This is a very sophisticated fraud carried out across borders, within the European community, using the beneficial trading rights between member countries to defraud the HMRC of VAT. It is usually committed using small easily transported computer chips or mobile phones which are of high value and do not require large infrastructure behind them.
The fraudster will register for VAT in the UK and then purchase these goods from a supplier within the European Community. Because the importer is registered he is sold the goods tax free. He then sells them on at a higher, VAT inclusive price to another company. He then disappears without paying the VAT to HMRC. It does not stop at this point as the goods are then sold on to other UK registered companies, some of them innocent in this fraud but some not.
The whole point of this is to make a trail of selling and re-selling making detection of the fraud as difficult and complicated to trace as possible. At the end of the â€œcarousel fraudâ€ of transactions very often the goods are sold back to the original supplier.
Unbelievably this fraud can take place all in the same 24 hours without the goods ever leaving the warehouse that they were originally imported to until the final transaction when they are exported back to the European Member country. The same goods can be sent through this process time and again, round and round on the carousel. The œsting in the tail for the HMRC is that the original importer has never paid the VAT due, but the re-exporter will claim fraudulently the VAT that was never paid from the HMRC. There have been cases where the carousel fraud has only ever been a paper trail with no goods actually existing.
Carousel fraud costs HMRC Billions of £’s every year
This type of fraud is very organised and committed by criminals looking for large illegal gains with prosecution unlikely. The cost to the HMRC is estimated in many billions of pounds lost every year and the crime is being taken very seriously, not only by the UK Government, but by governments throughout the European Union. There is now robust collaboration between member states authorities to try and halt carousel fraud criminals.
HMRC, in collaboration with Dutch officials, named 3,100 UK criminals who had accounts in the First Curacao International Bank in Bermuda and have so far recovered over £60 million from these accounts. Tough new measures introduced in the UK have managed to cut the losses down to less than £1 billion in 2010 and last year the HMRC won over £200million from carousel fraud criminals in confiscation orders. The fight against carousel fraud is going in the right direction, but as it can be committed by the press of a computer key backed up with good fraudulent documentation for the transactions, the fight is still uphill.