The Government have obtained permission for de-rogation for a new VAT accounting system (introduced into last years Finance Act) from the EU for handling of two categories of goods, mobile telephones and computer chips/microprocessors/central processing units which have been involved in massive Missing Trader Intra-Community (MTIC) fraud.
This so called 'reverse charge' system will help prevent fraud by reversing the standard accounting system for VAT used in the UK.
With this new system , which will apply from July 1st the supplier of the specified goods does not account for the VAT on their sales when selling to other VAT-registered businesses.
The purchaser of the goods will be responsible for payment and accounting of the VAT.
Provided that the purchaser has correctly done so, they can recover this VAT in the normal way.
This means that HM Revenue & Customs (HMRC) is not put in a position where it may have to make repayments of VAT where the corresponding tax on the sale has not been paid to it - it also places a massive burden and extra costs on legitimate traders of these items and disrupts their cash flow.
Self evidently, dishonest traders - alerted by the lengthy delay caused by the EU in introducing this system, will already have switched to other high value, low weight and volume items to perpetuate the fraud.
The HMRC claims the level of trading associated with attempted fraud has fallen significantly in recent months - it has been running for over 3 years at the level of £400 Mn. a month. They claim (rather disingenuously) "statistics published by the ONS, using estimates produced by HMRC, show that the trend of reduced levels of trading associated with MTIC fraud is continuing, with a substantial reduction in recent months."
Although their last pronouncment on producing the January 2007 Trade Statistics was alittle confusing
"Following a change in the pattern of trading associated with Missing Trader Intra-Community (MTIC) fraud, identified by Her Majesty's Revenue and Customs, interpretation of the breakdown between EU and non-EU trade is more difficult. Originally, most carousel chains only involved EU member states. More recently, some carousel chains have included non-EU countries, for example, Dubai and Switzerland. However, the import adjustment is applied only to EU imports as the goods return to the UK via the EU - but it is this part of the trading chain that is not recorded."Which might sound to some folks that the devious crooks have already made the necessary re-arrangements... if not they will migrate again to other areas of criminality .......
........ Stephen Crisp, 49, had hidden 52.49 kilos of cocaine and 5.7 kilos of heroin (calculated at 100% purity) in 81 brown taped packages under the bunk on the passenger side of his German registered lorry which were discovered at Folkestone last August. The drugs were said to have an estimated street value of £2.7 million. He got 20 years at Canturbury Crown Court on Friday.
UPDATE Budget 22nd March 2007
Reverse Accounting has been extended to Sat Nav equipment.