Seven arrested over carbon credit VAT fraud

HM Revenue & Customs (HMRC) has this morning made seven arrests in early morning raids as part of an investigation into a suspected £38m VAT fraud on the sale of carbon credits.

Those arrested are alleged to be part of an organised crime group suspected of operating a network of companies trading large volumes of high-value carbon credits.

Last month, the government removed VAT from carbon credits traded within the UK in an attempt to tackle the rapid expansion of fraud whereby companies purchase carbon credits from overseas VAT-free sources and then sell them on to businesses in the UK at a VAT inclusive price. The VAT charged by the fraudulent companies is never paid to HMRC.

The move followed similar steps taken in France and the Netherlands to remove VAT on carbon credits.

Les Beaumont, deputy director of criminal investigation at HMRC, said the authorities were hopeful they will be able to recover the unpaid VAT.

"HMRC investigates all criminal attacks on the tax system, halting theft of revenue, gathering evidence and supporting prosecutors in bringing offenders before the courts," he said. "We always aim to recover the proceeds of crime, restoring that money to the public purse where it belongs. That is our intention in this and all similar cases."

Officers from Europol, the European Union law enforcement organisation are assisting HMRC in the ongoing investigation.