The Bond House case has been one of the most closely followed rows in the
story of MTIC (missing trader intra-community) fraud.
The fraud is a VAT scam, with fraudsters selling on goods with the VAT added,
and pocketing the difference.
In Bond House, the government tried to pin that on businesses further down
the chain of sales, saying that the initial fraud meant everyone’s behaviour was
‘non-economic.’ As such they weren’t entitled to VAT.
On Thursday, 12 January, the European Court of Justice ruled otherwise and
the Treasury conceded the case.
HMRC has since admitted the ‘true cost’ of the decision is some £105m and
will be refunding VAT ‘at most’ to the companies concerned, some of which were
forced into bankruptcy or suffered significant damage to their business.
Indeed, Ian Prescott, founding partner and director of Bond House Systems
based in Castleford, West Yorkshire, said they had been ‘forced to cease trading
after the withdrawal of a VAT refund of £13.2m’ and had had to make 20 people
Paymaster general Dawn Primarolo has since said the government will not
hesitate to bring forward new legislation to tackle carousel fraud, but that the
government broadly accepted the Bond House verdict.
Here, we look at the case as it unfolded, how the judgment came and provide
analysis of its ramifications:
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