Seven accused of £38m carbon credits fraud

HMRC have arrested seven individuals on suspicion of a £38 million carousel fraud involving emissions allowances - just weeks after tax legislation was changed to prevent such crimes.

Those apprehended – six men and one woman – are believed to be part of an organised crime group operating a network of companies trading large volumes of high-value emissions allowances, otherwise known as carbon credits.

The sham firms purchased the credits from overseas, VAT-free sources and then sold them on to businesses in the UK at a VAT-inclusive price, with the tax earned never passed on to the Revenue.

The arrests took place in the Gravesend and Greater London areas; 27 properties, both business and residential, were searched. Further arrests are likely, claimed the taxman, and the investigation continues, aided by officers from Europol, the EU law enforcement agency.

In response to the escalating threat of VAT fraud in connection with trading of emissions allowances, the Government recently introduced legislation to zero-rate the supply of carbon credits within the UK with effect from 31 July 2009.

This is an interim measure that ministers expect to remain in force until an EU-wide solution is implemented. It follows similar action taken by France and the Netherlands earlier in the summer. 

Despite the recent change, the Revenue said it intends to pursue relentlessly those who may have used carbon credit trading to cheat the public purse.

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