Fraud levels in the UK are at record high, with the internet involved in almost all instances of fraud, according to the latest KPMG Fraud Barometer report.

In the first half of 2007, the government and businesses lost £594m to fraud, almost three times the figure recorded for the previous six months.

So-called carousel fraud has been the biggest contributor over the last six months, with four cases alone totalling £440m.

Carousel fraud occurs where fraudsters obtain VAT registration to acquire goods such as computer chips and mobile phones VAT-free from other EU member states. They then sell the goods at VAT-inclusive prices and disappear without reimbursing the VAT costs paid to them.

'It remains to be seen whether changes to the way that VAT must be paid by traders on mobile phones and computer chips, introduced from 1 June, will result in a decrease of this kind of activity – or whether it will shift the focus of professional criminals to other commodities,' said Hitesh Patel, a director at KPMG Forensic.

Other frequent areas of activity have included ID theft, bank card fraud, and phishing scams.

The government was the main victim over the period, with £485m of fraud committed against it. Investors (£47m) and financial institutions (£29m) were the next biggest targets.