Lengthy Disqualifications for Four Directors Involved in VAT Fraud

Four directors of unconnected businesses based in Cardiff and Cambridgeshire have been disqualified from acting as company directors for a combined period of 48 years for their part in VAT frauds that cost the taxpayer more than £ 3 million.

The first of our directors to ‘misunderstand’ their VAT obligations is Stuart Lee Hewlett, the director of a Cambridgeshire-based scrap metal wholesaler, S H Waste Management Ltd. Mr Hewlett gave an undertaking to the Secretary of State for Business, Innovation & Skills to not promote, manage or be the director of a limited company for the next 12 years.

Winding-up petition presented by HMRC

Mr Hewlett’s disqualification follows an investigation by the Insolvency Service, whose first act was to wind up the company following a winding-up petition presented by HMRC in respect to £77,825 of unpaid VAT.

The investigation found S H Waste Management had entered into a number of transactions, purchasing goods from outside of the UK and selling them domestically without accounting to HMRC. Output tax was not charged, and the sales were made at a lower cost price, which was only possible due to the failure to pay VAT.

Mr Hewlett’s final faux pas was his failure to maintain adequate accounting records. This oversight meant the investigators were unable to explain cash withdrawals from the business’ account totalling £44,804.

Defrauding the public purse

Welcoming the decision to hand down the disqualification, Paul Titherington, official receiver with the Insolvency Service, said: “This is not a victimless crime. These trades will impact on honest competitors as well as taxpayers and their families, who suffer the effects of funding shortages in healthcare, education and other front-line services as a result.

“The Insolvency Service will not hesitate to use its enforcement powers to investigate and disqualify directors whose companies defraud the public purse.”

Leafybug’s £3million VAT scam squashed

In the second of our tales of company directors deliberately defrauding the taxpayer, we encounter the three directors of Leafybug International Ltd, which traded as Furniture Direct in Cardiff. The fraudulent trio have been handed a combined director disqualification of 36 years for their part in a £3,045,055 VAT scam.

Following an investigation by the Insolvency Service, Ihtesham Ali Hassan (36), Waseem Mohammad (44), and Clive Thomas (71) received a 13-year, 12-year and 11-year disqualification respectively for their part in the fraud.

A systematic criminal attack on the VAT system

The investigation found that Mr Hassan caused Leafybug to engage in missing trader intra-community fraud (MTIC), commonly known as carousel fraud, from 1 April 2010 to 24 August 2010. During that time, deals conducted by Leafybug caused a loss of at least £2,304,220 to HMRC. The court found that Mr Hassan’s purported ‘due diligence’ had simply been a sophisticated attempt to prove the company was trading legitimately.

Clive Thomas, the oldest of this duplicitous trio, was handed an 11-year disqualification for failing to ensure adequate due diligence was conducted by the company. The result was Leafybug’s participation in deals between 1 March 2012 and 31 March 2012, which led to an HMRC loss of at least £621,018.

Between 8 October 2012 and 15 November 2012, Waseem Mohammed failed to disclose transactions that caused a loss of £120,327 to HMRC. He was disqualified for 12 years for his part in the fraud.

Significant cost to the Exchequer

Commenting on the decisions, Ken Beasley, Official Receiver at the Insolvency Service, said: “Leafybug International Ltd was involved in trading connected with fraudulent VAT schemes which had been costing the UK Exchequer significant amounts of money at the time the frauds were perpetrated.

“This is not victimless conduct, and the Insolvency Service will not hesitate to use its enforcement powers to investigate and disqualify directors whose companies defraud the public purse.”