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Four people in the construction industry have been arrested by HM Revenue & Customs officers (HMRC) investigating a suspected £16m VAT fraud.

HMRC has undertaken searches in a number of business and home addresses in the Leyton and Woodford Green areas of London, and Loughton in Essex.

Codenamed Operation Guess, the action follow a year long investigation into VAT fraud in the construction industry and subsequent money laundering activity.

Those arrested have been taken to Customs custody facilities in the area for questioning by HMRC investigators.

The fraud relates to businesses allegedly involved in new-build construction. New-build construction is zero rated for VAT purposes but a VAT registered builder/constructor may reclaim VAT on the related purchases and expenses incurred in the construction.

Chris Harrison, director of operations, Criminal Investigations, for HMRC said: "We have a duty to protect the revenue and today's arrests are the result of lengthy investigations by dedicated officers who work tirelessly fighting criminal attacks on the tax system. This is not victimless crime, and we are committed to bringing those involved to justice, depriving them of the proceeds of their crime and to recovering the money stolen from the UK taxpayer".