Understanding VAT Carousel Fraud: Post-Brexit Evolution and Global Impact in 2025

• VAT carousel fraud is a complex scheme defrauding governments of VAT revenue
• Post-Brexit, the fraud has expanded beyond Europe into South East Asia and digital markets
• The fraud involves buying goods VAT-free and reselling them with VAT added, then disappearing without paying the tax
• Transactions are typically B2B with multiple shell companies to obscure operations
• The same goods may be traded multiple times with fictitious transactions and false invoices
• Innocent businesses can face denied input tax claims, investigations, reputational damage, financial losses, and legal issues
• The Kittel Principle allows denial of input tax claims if a business knew or should have known about the fraud
• Businesses must conduct due diligence including partner checks and transaction verification
• HMRC investigations focus on dishonest conduct in high-value VAT cases with serious consequences
• The reverse charge mechanism applies to specific high-risk sectors
• Future developments include enhanced digital reporting, real-time monitoring, blockchain verification, AI fraud detection, and cross-border cooperation

Source: deeksvat.co.uk

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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