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Last Updated: Friday, 14 July 2006, 14:54 GMT 15:54 UK
Do you want to be a millionaire: The victim's story
Mike Cheetham
Mike Cheetham was a legitimate exporter and his company Bond House Systems was trading up to one million pounds a day.

But his business ended abruptly when he discovered he had VAT fraudsters in his supply chain. This is Mike's story in his own words.

"Carousel and missing trader fraud are very, very serious problems for not only the UK but for virtually every EU member country.

"I don't think any of the member states have got an accurate idea of the scale of this very simple fraud but estimates for the UK seem to vary between 2 and 7 billion a year.

"In 2002, our company Bond House Systems Ltd which was a computer component distributor based in the North of England, started to get concerned about the large orders we were getting for computer chips from other members states.

"So we decided to ask Customs what we should do and whether we should continue trading at these levels and with these people.

"We were reassured and told by several different specialised teams that if we provided all our trading details to these intelligence departments that this information would be used to police our chains of supply and that 'Customs would remove the bad people.'

"We were confidentially told that Customs had the resources to visit any company within 48 hours and any suspicious company would be de-registered or monitored.

"And so we carried on trading safe in that knowledge.

"Can you imagine our shock when two months later, three customs officers arrived at our offices and told us that we were being assessed for 13.2 million because we had missing traders somewhere down our chain of supply.

"These were not companies that we had dealt with or even heard of. They were nothing to do with us whatsoever but Customs seemed to believe they could bill my innocent company for the crimes of people we had never met or even had the means to know about.

"It was totally absurd but nonetheless, the consequences of the 13.2 million bill meant that our 10 year old company was rendered instantly insolvent and we had to lay everybody off and freeze the company.

"A huge legal battle then ensued which progressed through the VAT tribunals to the High Court and then to the ultimate European Courts of Justice. Fortunately the latter saw some sense and told HMRC that what they had done to us and another 330 companies was wrong."


This is what Sir David Varney, chairman of HM Revenue and Customs told Panorama about traders in Mr Cheetham's position.

"It is the trader's responsibility to check whether the deal in which they are involved is a good commercial deal and that principle has been reinforced by the European Court of Justice saying that traders should take every step to make sure they are involved in a reasonable transaction.

"So I don't accept the premise that we are in the business of taking commerical risk or authorising transactions in general.

"Our position is that we are there to help the system work but the commercial decisions are taken by the people involved."



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