MTIC/Carousel Fraud
Missing trader fraud, also known as missing trader intra-community fraud MTIC/Carousel Fraud, is the abuse of VAT rules on the cross-border transaction within the EU.
How does MITC fraud work?
Acquisition fraud
A missing trader purchases goods from a supplier located in another EU state. As this is a cross-border transaction within the EU the supplier does not have to add VAT.
Carousel fraud
This is when the missing trader purchases goods from a supplier located in another EU state. The missing trader then sells the goods to a business and charges VAT. The missing trader then disappears without paying VAT to HMRC.
The buying business then sells the goods to a second business and charges VAT. It pays the excess VAT received from the second business to HMRC.
The last business in the chain sells the goods to a broker. The broker then exports the goods to an EU customer without charging VAT at this cross-border transaction within the EU. The broker then reclaims the VAT he has paid when purchasing the goods. In doing so, the broker is effectively reclaiming the VAT not paid by the missing trader and crystallising HMRC’s loss.
HMRC will not always prosecute the missing trader, however they would target those who are in the chain and those behind the fraud. If you have been affiliated with trading that has led to MTIC/Carousel Fraud, you could still face a prosecution. It is crucial that you instruct a solicitor from the onset. This offence carries a lengthy custodial sentence and confiscation order most likely would be made under The Proceeds of Crime Act.
