HMRC moves quickly to stop renewables VAT scam

24 Jun 19

The government has swiftly brought in measures to stop a renewable energy sector VAT fraud - one of a range of scams costing EU states an estimated €50bn each year.

Criminal gangs have started to trade in ‘renewable energy certificates’ and charge VAT but not pass this on to HM Revenue and Customs.

These certificates, which are usually issued by renewable energy developers to energy suppliers to guarantee electricity has come from a specific project, are also being bought as a commodity. This opens up an “opportunity for fraud”, according to the HMRC.

Once the renewable energy ‘certificates of original’ are sold the fraudsters siphon off the VAT rather than pass it on to the tax department.

HMRC called the scam a “highly sophisticated and well-organised criminal attack on the VAT system”.

The change – brought in earlier this month without consultation - will mean a ‘reverse charge’ has been introduced so the VAT burden will be on the buyer as opposed to the seller.

Richard Asquith of the tax consultancy Avalara said the changes would seek to “curb extensive misdeclarations of cross-border EU trading to evade VAT payments”.

He suggested that HMRC may have “inside information” on recent instances of this type of fraud, which would explain the lack of consultation on this policy change.

This scam is an example of ‘missing trader’ fraud whereby fraudsters exploit VAT-free trading between jurisdictions and fail to eventually pay VAT to the relevant country.

This ‘missing trader’ fraud costs EU members states €50bn every year in lost VAT revenues, Asquith estimated.

An HMRC spokesperson said: “We have acted swiftly to introduce a reverse charge, which will counter an imminent threat to abuse of renewable energy certificates.

“By taking this action, the government has protected taxpayers from potentially being victims to missing trader fraud and will ensure tax revenue stays in the hands of our vital public services.”

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