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Fraudsters take advantage of VAT loopholes in UK secondary metals trade


Members of the British Metal Recycling Assn (BMRA) are being targeted by fraudsters taking advantage of VAT loopholes when trading secondary metals, according to director general of the association Ian Hetherington.

Some BMRA members have become party to a trade or series of trades involving more than one country that take advantage of differentials in
VAT rates, Hetherington told Metal Bulletin recently.

The BMRA has notified the Inland Revenue, Hetherington said.

“It will involve the import of material or certainly a trade and the export of a trade or material,” he said.

“The Inland Revenue term this ‘missing person VAT fraud’ as [the traders] disappear having claimed VAT refunds and at the other end they don’t pay the VAT owed,” he said.

It exploits the UK’s 20% VAT rate and the 0% charged elsewhere, Hetherington said.

“Our members are vulnerable to being innocent parties to this type of transaction,” he added. “Most of the time it is inter-European trade and conducted either actually or virtually.”

The UK is susceptible to this type of trade as it is yet to adopt a reverse-charge VAT system for secondary metals, which many other countries in Europe have adopted, Hetherington said.

Metal Bulletin has spoken to a merchant in Europe that has seen such trades happen, particularly with copper scrap. However, the BMRA said the evidence it has seen shows that various metals are involved.

“From the way I see it, it has become an industry in itself,” the merchant said. “This trade has been going on for three years, shifting from country to country,” he added, mentioning previous instances of this type of trade in Germany and Poland.

Hetherington said that the trade of mobile phones is another example where this “missing person VAT fraud” has occurred.

The UK government has since added a reverse-charged system for this type of trade, he said, which has alleviated the problem.

“We would like to see [the government] introducing reverse-charged VAT on all secondary metals,” he said.

The BMRA has agreed to make any evidence it comes across available to the Inland Revenue. However, Hetherington said it was extremely hard to track the trades once the trade has taken place.

Daniel Gleeson
Twitter: @dangleeson_mb

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