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    1. lyndonb is offline

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      #1

      MTIC fraud explained - What is Missing Trader Intra-Community

      Can someone explain the MTIC fraud? I think it’s also called the carousel fraud?
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    2. Plunky97 is offline

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      #2
      MTIC stands for Missing Trader Intra-Community. MTIC fraud targets the UK VAT system, and is actually quite a sophisticated, albeit, criminal act. According to HMRC, this fraud is estimated to have cost between Ł1.12 and Ł1.9bn back in 2006.

      The way it works is that electronic goods, computer chips, mobile phones, and the like are imported VAT-free from other EU member states. These goods are then sold through pre-arranged business-to-business dealings in the UK, and later exported.

      The initial seller disappears without having paid any of the VAT that would have been charged on the initial sale, thereby creating a tax loss. It’s at the point when the trader who exports the goods from the UK makes the VAT repayment claim to which he says he’s entitled that the tax loss becomes apparent.
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    3. lyndonb is offline

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      #3
      Wow, that’s some serious fraud. Where does carousel fraud come in?

    4. Plunky97 is offline

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      #4
      Carousel fraud is an even more extensive abuse because it involves the same goods circulating repeatedly between the UK and other EU Member States. In many instances even countries outside the EU are involved. The criminals steal the VAT with each transaction.

    5. lyndonb is offline

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      #5
      I get it. The cycle goes round and round like a carousel…Have they done anything about it?

    6. Plunky97 is offline

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      #6
      Yes, in 2006 the government submitted an application to the European Commission for a variance from the 6th VAT Directive to change some of the accounting rules when certain goods are supplied, specifically, those rules related to the electronics, computer chips and mobile phones that seem to facilitate the MTIC fraud.

      Historically, these goods accounted for approximately 90% of the goods involved in MTIC fraud. But, theoretically, the fraud can be perpetrated using any legitimate, high value, readily available goods valuated for the standard VAT rate.

      You’ve probably heard of the “reverse charge”. That’s the accounting change that went into effect, and is part of the strategy for combating this carousel fraud. While still significant, there seems to have been some reduction in MTIC fraud activity resulting from sales of mobile phones and computer chips.

    7. lyndonb is offline

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      #7
      Yea, I’ve heard of reverse charge, but don’t know exactly how it works.

    8. Plunky97 is offline

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      #8
      Reverse charge applies to sales made within the UK, where a VAT-registered business purchases specified goods that will then be used for other business purposes. The normal VAT rate of 17.5% applies in sales of goods to non-business customers. Reverse charge works as follows:

      • The buyer of the goods is responsible for accounting for the VAT, not the seller

      • The supplier doesn’t charge the VAT

      • The supplier must indicate on the invoice that reverse charge applies

      • As long as the buyer has accounted for the VAT correctly in accordance with the reverse charge procedure, the buyer is the one who has a right to recover the input tax

    9. lyndonb is offline

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      #9
      Sounds like a lot of additional paperwork for both the customer and the seller…

    10. NeilG is offline

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      #10
      You’ve got that right. It’s all a bureaucratic nightmare. The honest business guy is burdened with all this additional work because of the fraud committed by a few.

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