Island knowledge, national expertise

Director Held Personally Liable for Multi-Million-Pound Missing Trader Fraud

Where a company becomes involved in the fraudulent evasion of tax, the corporate veil will rarely protect its directors from personal liability. An elderly businessman found that out to his cost when he received a seven-figure bill that was likely to plunge him into bankruptcy.

The businessman was the sole shareholder and active director of a limited company that entered into transactions connected to a missing trader intra-community fraud. Following an investigation, HM Revenue and Customs assessed the company for £4,890,631 in VAT. A personal liability notice (PLN) was raised against the businessman in the same amount.

Subsequently rejecting the company's appeal against the assessment, the First-tier Tribunal (FTT) noted that its turnover had rocketed from about £2,000 in one quarter to over £13 million in the next. Whilst stopping short of finding that the company had actual knowledge of the fraud, the FTT found that it had effectively turned a blind eye to the need for robust commercial due diligence.

Challenging the PLN, the businessman argued, amongst other things, that he had no idea that the company's trading was suspect. In refusing to grant him permission to pursue his appeal, however, the FTT noted that it had been lodged far outside the relevant statutory time limit. The merits of his case were in any event extremely weak.

The FTT acknowledged that its ruling would have a particularly harsh impact on the businessman. His home would be at risk and he was very likely to be made bankrupt at the age of 75. Given that his appeal had no realistic prospect of success, however, it would be no mercy to permit him to proceed with it.

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