An investigation into an alleged multimillion pound VAT fraud involving computer components is likely to take months, Customs and Excise officers have warned.
A total of 21 people were arrested last week at various addresses across the UK, including Leicester, Nottingham, Birmingham and Oxford.
The suspects, all released on police bail pending further investigations, are alleged to have imported computer components worth over £7m from other European Union states, charged VAT on the sale of the components to customers, and then shut down the original company without paying the tax due. This is known as missing trader fraud.
Customs officer Bill O'Leary explained that the fraud involved components such as chips, motherboards, processors and DRam memory. The Customs and Excise operation, codenamed Darken, also involved the seizure of assets worth an estimated £500,000, including computers and accounting documents.
"This operation has involved meticulous planning," he said, adding that the ongoing investigation into the alleged fraud is likely to "take many months". None of the companies connected with the fraud can be identified for legal reasons.
This type of activity is putting legitimate companies out of business, said O'Leary, because they cannot compete with the low prices on offer.
"Not only that, but end users have nowhere to go when things go wrong," he explained. Resellers and distributors should "steer clear" of offers that "seem too good to be true", he added.
According to Andy Brown, an analyst at IDC, this type of VAT dodging is common in the grey market and could increase if tax is raised on CD rewriteable goods.
"Manufacturers producing white-box goods may well have a surplus of spare components which can either be sold at a lower rate or be left lying around losing money," he said.
First published in Computer Reseller News
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