Bond House Systems Limited v Commissioners of Customs and Excise

Facts

Bond House Systems Limited was a Castleford-based dealer in computer components, principally Intel Pentium 4 processor chips, whose business had been carried on since about 1992 by a partnership of two of its directors before incorporation in 1999. It bought chips from UK VAT-registered traders and sold them, zero-rated, to traders registered in other Member States, mainly in the Republic of Ireland, and was accordingly a repayment trader. Its May 2002 return, rendered on 7 June 2002, claimed credit and repayment of £16,287,204.94. Instead of paying, the Commissioners investigated, visiting Bond House's premises on 11 June 2002; the company ceased trading the following day. After paying £6 million in July 2002 and, following an application by Bond House to the Administrative Court for judicial review, a further £2 million, the Commissioners gave a reasoned decision by letter of 19 September 2002 allowing £2,732,200.54 but refusing £13,555,004.40, being the input tax on 27 of its May purchases, and in October 2002 assessed Bond House for £5,267,799.46. The Commissioners contended that those purchases formed part of "carousel" frauds and were devoid of economic substance, though they accepted Bond House was neither a participant in nor aware of the fraud. Bond House appealed to the tribunal.