Disabled people are abusing a scheme allowing them to buy cars VAT-free, by selling the top-of-the-range vehicles at a profit.

Under the scheme, disabled people are exempt from paying VAT on modified vehicles, which the guidelines state must be for personal use. But police confirmed last night that a “group of people linked by their disabilities” were abusing the system and making hundreds of thousands of pounds.

The scam operates by wheelchair-users ordering exclusive vehicles, usually available only on a waiting list, and making a minor modification, such as adding a knob on the steering wheel. The modification is then removed and the vehicle is sold at an instant profit of several thousand pounds, while undercutting the showroom retail price.

South Yorkshire Police’s fraud squad has raided properties across four counties in its investigation of the practice. Detective Inspector Graham Wragg said: “I suspect there are more and more people across the country who are abusing the system in this way and there may be many more vehicles out there that have been obtained in this way.”

He said that all the suspects were genuinely disabled and receiving state benefits. “I wouldn’t say it’s an organised criminal gang as such. It’s a group of people who are linked by their disabilities who seem to have recognised a weakness in this area and they are all doing the same kind of abuse of the system,” he told BBC Radio 4’sYou and Yours consumer affairs programme.

Any fraud investigation would consider whether the applicants had exaggerated their disabilities to claim benefits and whether by selling the vehicles they had been trading and so breaching their incapacity benefit conditions.

The Department for Work and Pensions said that it would not comment on individual cases, but Vernon Sanderson, of the department’s Yorkshire and Humberside fraud team, told the BBC: “The benefit fraud aspect comes in where evidence suggests their disability isn’t as severe as stated, which in turn allowed them access to the scheme in the first place. And also our rules on claiming incapacity benefit are quite clear, which is that you are only allowed to do permitted work and buying and selling cars in large volume doesn’t come under that.”

It is understood that the group has targeted top-of-the-range Land Rovers, Bentleys, Maseratis and Lamborghinis, costing up to £70,000. That means that the group’s members could save as much as £12,250 on each transaction in VAT. They could therefore earn several thousand pounds profit on each sale and still undercut the retail price. The cars would then be sent to another garage to be sold as new, “preregistered” vehicles.

Several suspects in Yorkshire, the North East and Derbyshire have registered up to 60 top-specification Range Rovers each in the past two years, according to an investigation by You and Yours. Another suspect, in Merseyside, registered 35 in the same period. Six people have been arrested for money laundering in connection with the wide-ranging inquiry and released on police bail. The Department of Work and Pensions and Revenue & Customs refused to confirm whether they were investigating the matter.

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