Missing Trader Fraud - "Innocent Parties" - The 'Bond House' Decision

The 'Bond House' Decision

Although the example above referred to all the links being co-conspirators in the fraud, according to a decision in the European Court of Justice it is possible that innocent parties also become involved by simply buying and selling on goods. If it is the first party in the chain who is the absconding fraudster, the goods can continue to be sold-on by innocent parties.

In the UK, the position until 2006 was that HM Customs and Excise withheld VAT repayments to others later on in the chain, on the basis that the transactions were lacking in economic substance and so should be outside the scope of the VAT regime.

Bond House Systems Limited was one such "innocent trader", who was owed £13,200,000 in VAT repayments by HM Customs and Excise. It challenged the UK Government's stance, taking the case eventually to the European Court of Justice. In January 2006 the ECJ found in favor of Bond House and ordered that the VAT owed to Bond House be repaid by HM Revenue & Customs. It is estimated the decision will cost the UK government hundreds of millions of pounds as other companies make their claims.