HM Revenue & Customs (HMRC) is “urgently changing the way it taxes telecoms companies” because of signs that criminals could exploit the industry to carry out tax fraud, Financial Times (FT) reported.

The issue is where criminals buy goods or services in another EU state, which means that value added taxes are not applicable, and then sell them with VAT added on – before disappearing rather than passing this to the taxman.

The particular issue for the telecoms sector, which follows electricity, gas and carbon trading as a target for VAT fraudsters, is that fraud in services are difficult to track compared to sectors where physical goods are involved.

According to FT, from next week HMRC will switch the responsibility for collecting VAT from the suppliers of wholesale services to their customers, to remove the opportunity for fraudsters to steal the tax paid.

A wide range of companies will be impacted, including those providing wholesale voice and SMS services.

While the change will take place from 1 February, HMRC acknowledged that this “may be challenging for some businesses”. As a result, it will take a “light touch” approach in the early days to help those making “reasonable efforts” to comply.