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Revenue U-turns on carousel carbon trading

Enviro-scammers left feeling green around the gills

Combat fraud and increase customer satisfaction

Her Majesty's Revenue and Customs said that from midnight last night all trades in carbon credits will be VAT-free, because of fears that carousel fraudsters, who usually fraudulently exploit computer chips and mobile phones, will target the trade.

Carousel fraud or Missing Trader Intra-Community fraud occurs when goods are imported from a community country VAT-free, then sold on with VAT added. The trader then disappears without paying the tax to the Revenue. Goods can be, or can appear to be, moved several times between countries with tax added at each stage. It has been a huge problem for the UK, at one stage costing the taxman over £3bn a year.

Last week the Revenue told The Register it was seeing no evidence of a move into carbon credits by fraudsters. A spokesman said HMRC was aware that credits were a possible target and was monitoring the situation but saw no evidence of fraud.

This followed similar moves in France to make carbon credits VAT-free earlier in the month. In the Netherlands the rules were changed so that the buyer, not the seller, is now responsible for VAT payments. HMRC introduced reverse charging for computer chips and mobile phones in 2007 to counter fraud.

The Revenue said last night the move: "follows evidence that commodity trading in emissions allowances is being used by fraudsters to steal VAT revenues from the UK, and that the UK may become a major target for this activity in the coming months."

This takes effect immediately while an EU-wide solution is found. The Revenue's full statement is here. ®

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