Carousel or missing trader intra-community fraud (MTIC) exploits the fact that the movement of goods between EU states is VAT free. Criminal profits are made by fraudulently claiming VAT from HMRC for bogus transactions.
Those implicated in carousel fraud often perceive that no one is harmed by their actions, that it is just the state that loses out. Furthermore, accused parties often claim to be an innocent party used by others, assuming that the complexities carousel frauds pose to the Crown Prosecution Service (CPS) will shelter them from prosecution. Both assumptions are mistaken and those at risk of investigation or prosecution should seek immediate legal advice.
Difficulties of carousel fraud prosecution
It is certainly true that carousel fraud cases can involve long complex investigations; trials with multiple defendants; and a vast amount of potentially relevant material that has to be sifted by investigators to build a case and comply with disclosure of evidence.
However the criminal justice system is ‘ramping up’ its response to tax evasion and fraud which it unequivocally states is not a ‘victimless crime’. HMRC reckons that it costs the UK economy £14bn a year, the equivalent of £530 from every household, depriving the state of money that could be spent on public goods and services.
The ramped up response has three strands: a stronger fraud prosecution capability with more qualified investigators; a strategic decision to radically increase the number of tax evasion cases prosecuted; and a growing body of successful prosecutions of individuals, groups and organised criminals for VAT fraud, excise duty, tax evasion and sophisticated but dishonest tax avoidance schemes.
Those convicted of serious and large scale fraud and tax evasion can expect significant custodial sentences and legal procedures to recover the proceeds of their crimes.
The role of prosecutors and the CPS in carousel fraud prosecution
Prosecutors are involved from the beginning of an investigation, give advice and help to manage it and focus on gathering evidence that is as strong as possible to demonstrate guilt. HMRC is allocated £900m over four years for “a more robust criminal deterrent against tax evasion” and to “increase the number of criminal prosecutions fivefold.” In 2010/11 the CPS successfully prosecuted 200 tax and excise evasion cases, by 2011/12 that had risen to 550.
The CPS is increasingly challenging the claims of defendants that they are harmless and that these are victimless crimes, demonstrating that those convicted used fraud and tax evasion to fund a “lavish, greedy lifestyle at the expense of people who face real hardship”. Also the scale and length of custodial sentences has increased in these cases: “There is a place for deterrent sentencing. Large scale frauds on the Revenue involve potentially enormous profits. Condign punishment can be expected. A complex web is difficult to detect and very expensive to prosecute.”
Conclusion
The CPS states that “at the heart of any complex fraud is one simple notion… dishonesty. The criminal justice response to this dishonesty has to be clear and firm.”
The message for anyone being investigated for carousel fraud is that the CPS and HMRC are strongly focused, well funded and organised and will build a strong evidence based case and will prosecute.
Clearly those involved in any such investigation should seek immediate legal advice. Call 01616 966 229 today for more information about defending carousel fraud prosecutions, you can also complete our online enquiry form and a member of the team will get in touch.