Customs comes knocking

Two arrests as C and E cracks down on missing trader fraud

An £80m VAT missing trader scam involving mobile phones and computer chips was uncovered last week as Customs and Excise made two arrests.

Customs officers conducted a series of raids in Chelmsford and searched businesses and homes across the UK.

The two suspects, a 33-year-old man and 32-year-old woman, were arrested for money laundering offences contrary to the Criminal Justice Act 1988. They were released on bail pending further investigation.

Tackling missing trader fraud has become a top priority for Customs. Earlier this year it won a significant tribunal case against component wholesaler Bond House Systems, which was an unwitting participant in a case of missing trader fraud. The firm was made to pay £13m to Customs.

This victory means businesses that unknowingly become involved in VAT fraud can become liable.

John Barber, Customs officer, said: "We are putting a lot of extra resources into this as we are taking the money lost to the Treasury very seriously."

It is estimated that VAT fraud cost the government £2.75bn last year.

Alan Norton, head of intelligence at credit management firm Graydon, said: "This is a growing problem and Customs is in a win-win situation following the Bond House case.

"It could go up into the channel until it finds a firm that has the funds to pay. It could even go as high as vendors."

Norton added that channel players should make sure they know who they are dealing with and avoid deals if the price seems too good to be true.

Dave Flack, marketing director at distributor Memory Plus, said channel firms will think twice about doing large deals following the Customs win.

"There are scrupulous traders that are conscious of missing trader fraud, but if you make a large deal, you shouldn't be held responsible for the rest of the chain.

"It will make firms hesitant to close big deals, which is unfair on honest businesses."

New VAT rules
Last month Customs applied two rules for firms in the IT, mobile, alcohol and road fuel trades:

• Firms that do not have a valid VAT invoice will not be able to claim VAT.
• If a firm has reasonable grounds to suspect a supplier in the chain may fail to pay VAT, but neglects to inform Customs, they could be liable to pay it themselves.

Want to manage risk better? Visit CRN's credit service at www.crnservices.co.uk.