HMRC instigates first carbon fraud raids

The taxman has instigated the first set of UK arrests for alleged carbon tax evaders. Nine people including seven men and two women were arrested in the Gravesend and Greater London areas for over £38m worth of fraudulent VAT reimbursements on carbon trading.

Just fewer than 30 properties, both residential and business, were raided. A HMRC spokesman confirmed that all nine suspects have been bailed with no charges as yet having been made in connection with the fraud.

It is believed that the suspects were part of an organised crime group operating a network of companies trading in large quantities of carbon credits.

Fraudulent companies purchase carbon emission allowance credits abroad, which are VAT free. They then sell them to businesses in the UK at a VAT inclusive price. The VAT charged by the fraudulent companies is never paid to HMRC.

HMRC recently announced that it was implementing a zero rate of VAT on all carbon trading in the UK to prevent this type of VAT fraud which have been widely seen on the continent particularly France.

Another way that fraud can take place is that a company selling carbon emission allowances, also known as carbon credit, disappears or goes into administration before paying the VAT on the sale. Meanwhile the company which had paid for VAT on the purchase of carbon credits is reimbursed by HMRC without the taxman having received any VAT payments.

A HMRC spokesman said although there is now a zero rate of VAT on carbon trading: 'We will relentlessly pursue VAT fraudsters.'

'We will continue to investigate all frauds' he added.

Les Beaumont, deputy director of criminal investigation for HMRC said: 'HMRC investigates all criminal attacks on the tax system, halting theft of revenue, gathering evidence and supporting prosecutors in bringing offenders before the courts.'