15 year ban for director’s participation in fraudulent Missing Trader VAT scheme

The Insolvency Service’s investigation of Masstech Ltd, a carbon emissions allowance and metals trader, uncovered surprising figures with Masstech Ltd making £38 million in the 4 month period June to September 2009. The company then filed quarterly returns with HMRC attempting to falsely recover VAT that ‘missing traders’ earlier in the supply chain had failed to pay to HM Revenue and Customs (‘HMRC’). This was part of a Missing Trader Intracommunity (‘MTIC’) fraudulent scheme.

Masstech Ltd’s payment to third parties totalled £7.38 million. The director of Masstech Ltd was warned several times by HMRC of the risks of third party payments in the context of MTIC fraud.  HMRC held that as there was one sole director he had complete control of the companies financial affairs which included “questionable pricing decisions” and entering contracts that were “too good to be true”.  

It was found by the courts that the director knowingly participated in the scheme where his business Masstech Ltd acted as a ‘buffer’ trader. The buffer is an intermediate trader between at one end the ‘missing trader’, importing goods without paying over VAT due to HMRC and, at the other end, the exporter seeking to reclaim the VAT that had not been paid.

For his participation in the MTIC scheme the court decided the maximum 15 year director ban was appropriate.

Aspire Comment

To try and tackle missing trader fraud within the construction industry, HMRC have published draft legislation that will make supplies of standard or reduced rated construction services (‘specified supplies’) between construction or building businesses subject to the domestic reverse charge, meaning that the customer will be liable to account for VAT due, instead of the supplier. To view our article on the draft legislation relating to this click here.