Fraudulent business

The company was purchased in 2001 when the director was replaced by the second respondent and the secretary was replaced by the first respondent.

The company purchased computer parts from Germany between August and September 2001.

The parts were sold on by the company at a VAT-exclusive price which was less than the purchase price that the company paid. The only way that the company could make a profit was by retaining the VAT element which indeed was not paid to HMRC.

The company did not operate a bank account all payments being made and received through an account operated by the first respondent.

The first and second respondents alleged that the third respondent was responsible for the operation.

In October 2001 the Revenue obtained a default judgment against the company in respect of VAT due. Although the liquidator’s efforts realised a significant sum...