VAT ‘carousel’ fraud will cost the cost the government at least £5bn this year, according to a study by mid-tier firm Grant Thornton.

The firm made what it called a ‘conservative’ estimate based on official data showing sharp falls in the fraudulent activity in the past couple of months.

Grant Thornton said the estimate of £5bn was likely to be reached even if the final quarter of this year sees a substantial decrease in the scale of fraud.

‘The economic impact of [carousel] fraud continues to have a significant negative impact on the UK economy,’ said Stephen Gifford, the firm's chief economist.

‘Even on a conservative estimate we forecast losses to HM Treasury will amount to £5bn in 2006. That represents around one penny on the basic rate of income tax,’ he added.

Further reading:

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Britain's carousel fraud battle suffers European blow

Carousel fraudsters sent down for 34 years