Customs Swoop on UK Mobile Phone Tax Fraud

In one of the largest VAT fraud operations of its kind, 350 Customs officers raided over 70 properties across the UK and Spain in connection with a major VAT missing trader fraud estimated at US$200 million. Swoops were made by Customs investigators at a total of forty business premises and thirty-one residential premises across the UK. Searches were also carried out in Barcelona and Malaga in Spain and also in Majorca and Tenerife.

VAT, or Value Added Tax is a sales tax, which in the UK it is charged at 17.5% of the retail price.

Thirty-three men and six four women were arrested and are believed to be part of a sophisticated network of companies that "carousel" large quantities of cell phones. It is believed that the fraud involved buying mobile phones from the mainland VAT free and supplying them to businesses in the UK. The carousel occurs when companies then sell the phones back to the Continent, without payment of VAT to the UK Government and without the phones ever being used by a consumer.

Several large amounts of cash were also seized during the searches. At one of the business addresses, Customs officers also seized a ton of cannabis.

Missing Trader Fraud is a Europe-wide problem orchestrated by sophisticated criminals in a systematic attack on the VAT system. The criminal obtains a UK VAT registration in order to acquire goods VAT free from other EU member states. They then sell the goods on at VAT inclusive prices and disappear without paying VAT back to the Government. Typically the mobile telephones are sold to a person in another member state for less than the price paid to the original seller. Very often they are sold back to the original exporter so that they have moved in a carousel and ended up where they first started. This type of fraud fist came to light when European suppliers of mobile phones found that they were buying back phones that they had previously sold for less than they had sold them for."

Posted to the site on 4th July 2003