PBR follow-up: 'Carousel fraud measures may backfire'
Moves announced in the pre-Budget report to tackle the growing problem of 'carousel fraud' may backfire by creating red tape for legitimate business, it has been claimed.
The scam is used by companies to avoid paying VAT on imported goods such as mobile phones. It has helped to add almost £23bn to the UK’s trade gap between 1999 and 2002.
Nick Wood, partner in Grant Thornton’s recovery & reorganisatisation practice, said he broadly welcomed the government’s drive to tackle the problem.
But he added: ‘Whilst these measures attempt to tackle carousel fraud, they could also increase the likelihood that companies perpetrating it now try to disguise the nature of their activity even more.’
Because offenders sell goods across complicated webs of companies, legitimate firms can be caught out, he warned:
‘UK businesses already weighed down with red tape will need to check the integrity of every supplier and customer in the supply chain to avoid being caught up in a costly spiral of illegal activity.’