Business traders have lashed out at the taxman for holding back VAT payments from bona fide operators in its drive to foil carousel fraud.

Company bosses have claimed that despite meeting new requirements, HM Revenue & Customs is holding off repayment of hundreds of millions of pounds due to them from VAT refunds, the Daily Telegraph reported.

Peter Carnall owner of Eurostar Global, a mobile phone exporter, said he was being 'treated like a criminal' by HMRC. 'They have forced Eurostar to be without finance and to have extensive problems because of their actions. [HMRC] haven't paid us a penny, he said.'

Carnall said he had been lobbying HMRC without success for £114,000 he says Eurostar is owed. He added: 'Nearly 12 months after it started trading, Eurostar is still without any money, which HMRC commissioners are arguably illegally holding.'

Martin O'Neil, a senior consultant with Vantis Tax business advisers that are handling more than 20 delayed payment cases says: 'We know that fraud exists but it doesn't follow that everybody should be tarred with the same brush.'

The practice of carousel fraud, which involves criminals securing VAT registrations to buy items VAT-free from other EU states before selling them at VAT inclusive prices but then disappearing, has leached billions of pounds from the taxman's coffers.

Further reading:

Carousel cases: businesses not guilty by association