The UK tax authority, HMRC, has acted to introduce a reverse charge for supplies of renewable energy certificates. These certificates are issued to gas and electricity generators when they produce energy from renewable means. This is an anti-fraud measure which removes the opportunity for fraudsters to charge VAT and then go missing before paying it over to the Exchequer in Missing Trader Intra-Community (MTIC) VAT fraud.

These certificates can also be bought and sold as a commodity attracting others into the market which creates an opportunity for fraud. A reverse charge means that the customer is liable to account for the VAT rather than the supplier. This removes the opportunity for the VAT to be stolen.

There has been no consultation on this measure. The government says it needed to act quickly in response to a serious and credible threat to the VAT system. A reverse charge prevents supplies of goods and services from being exploited by those engaged in MTIC fraud.

MTIC fraud is perpetrated through transaction chains involving supplies of high-value goods or services with the tax loss occurring when the VAT charged to and recovered from the customer by the supplier is not passed on to HMRC but is retained by the supplier. MTIC fraud has been used by criminals to steal billions of pounds in VAT from governments throughout the European Union.

In the UK, the government has previously had to act to combat MTIC fraud in the trading of mobile telephones and computer chips and in emissions allowances. A reverse charge for mobile telephones and computer chips was introduced with effect from 1 June 2007 and one for emissions allowances with effect from 1 November 2010. A further reverse charge for gas and electricity was introduced with effect from 1 July 2014 and most recently a reverse charge for telecommunications services was introduced with effect from 1 February 2016.