Don’t ride the fraud carousel.

It’s worth recapping just what’s going on. Carousel fraud, aimed at avoiding VAT, is rampant and the government has introduced new legislation bringing in ‘joint and several’ liability for unpaid tax.

Bond House, a Castleford computer components wholesaler, then innocently gets itself caught up in a carousel fraud. As a result, the company finds itself facing a crippling VAT demand.

With the Bond House case and the new ‘joint and several’ liability law, the government’s new stance creates a ‘win-win’ approach for Customs & Excise in which the Exchequer will lose less VAT through illegal carousels.

Yet the company, a perfectly viable, legitimate business, is facing financial dire straits seemingly through no fault of its own. Like Customs, it is a victim of carousel fraud.

At the Manchester Crown Court, Customs maintained that Bond House was ‘naive’ and ‘imprudent’, and the judge backed this up, saying ‘its directors failed to ask themselves obvious questions’.

But if the government cannot catch up with these fraudsters, how does it expect a business, with far fewer resources, to know what they are dealing with?

Many smaller legitimate businesses could go down the pan because of this new crackdown. Because of their size, they will not have the time, money, or staff to carry out all the checks to ensure they are not dealing with these slippery villains.

The reason for the government’s stronger stance on ‘carousel’ fraud is clear. Losing billions of pounds per year is nothing to sniff at. But passing the buck to legitimate businesses that get caught up in fraud unwittingly is not the solution. It will instead only create another problem by forcing viable enterprises out of business.

Instead of going after innocent businesses, the government should create incentives so that if they do get caught in a carousel, traders can get out of it and inform the government about the fraudsters they were dealing with.

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