Further to my earlier piece about the Treasury taking pro active measures against the possibility of a major VAT fraud occurring, wrt trading in carbon credits (it is estimated that carbon credit fraud has cost HMRC at least £38M), by zero rating carbon credits.
Sandy Nicholson of KPMG warns in The Times that innocent traders who have traded "suspect" credits may face a problem with HMRC:
"The law gives HMRC the right to audit any businesses that have purchased carbon credits and block their ability to recover Vat if they cannot prove that they took 'reasonable care' in ensuring they made the purchase from a credible company.
The law means that any business could be treated as guilty until proven innocent."
Exactly what constitutes "reasonable care" in a trading system that is relatively new, remains to be clarified.
Tax does have to be taxing.
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