HMRC investigation and disqualification of Tax Dodging Directors

We start the new tax year with two directors who have received a directors disqualification order and a bankruptcy restriction for failing to fulfil their tax obligations to Her Majesty’s Revenue and Customs (HMRC).

The first of this week’s tax dodging directors is Darryl Glyn Martin (42), of Flint, Clwyd, the sole director of D & S Poultry Limited. The poultry catching firm has now been liquidated and Mr Martin disqualified from acting as a director for seven years by Wrexham County Court.

The ban commenced on 28 January 2015 and was handed to Mr Martin for neglecting to pay VAT to HMRC and failing to deliver company assets to the liquidator of his business.

Mr Martin treated HMRC detrimentally

D & S Poultry Limited was subject to a creditors’ voluntary liquidation on 10 February 2012. This was followed by a comprehensive investigation by the Insolvency Service into the company’s dealings. Failure to pay VAT incurs stiff penalties, but despite the warnings, the investigation revealed that Mr Martin had treated HMRC detrimentally by paying his trade creditors before making VAT payments.

The investigation also found that Mr Martin failed to account for, or deliver up assets to the liquidator with an estimated value of at least £18,314. This amount was comprised of money owed to the business, cash, and a motor vehicle.

Substantial creditor and VAT deficiencies

D & S Poultry Limited was placed into a company liquidation on 10 February 2012, with an estimated creditor deficiency of more than £100,000, and an outstanding VAT bill of £60,000.

Commenting on Mr Martin’s disqualification, Robert Clarke of the Insolvency Service, said: “Directors have a duty to ensure their companies maintain proper accounting records, and, following insolvency, deliver them to the office-holder in the interests of fairness and transparency.

“Without a full account of transactions, it is impossible to determine whether a director has discharged his duties properly, or is using a lack of documentation as a cloak for impropriety.”

The disqualification order means Mr Martin is not allowed to act as a director or take part in the formation or management of any limited company until 2022.

Another case of carousel fraud

In our second case of a company, director failing to fulfil their obligations to HMRC we take a look at an example of one of the more common VAT scams currently in the UK, that of Missing Trader Intra-Community (MTIC) fraud, also known as ‘carousel’ fraud.

Rafiuddin Ismail, a mobile phone trader from Nuneaton, Warwickshire, has been handed a 14-year bankruptcy restriction order for submitting wrongful VAT reclaims to HM Revenue & Customs.
The Insolvency Service investigation: Mr Ismail (42), a wholesaler of mobile phones and electronic items, had been trading under the name Swiss Gulf at the time of the Insolvency Service investigation. This commenced following a wind-up petition presented by HMRC and revealed Mr Ismail’s part in an elaborate carousel fraud.

The HMRC fraud investigation revealed that between 13 March 2006 and 27 June 2006, Mr Ismail had purchased goods in the UK and made onward sales of more than £74million to wholesalers in the EU. He then filed returns attempting to reclaim £12.7million of VAT. Unfortunately for Mr Ismail, this amount was disallowed by HMRC as ‘missing traders’ earlier in the supply chain had failed to pay VAT when due.

All the hallmarks of MTIC fraud

Aspects of Mr Ismail’s trading bore all the hallmarks of MTIC VAT fraud, in that:

– All the deals in question were traced back to tax losses
– All the deals took place back-to-back, with no holding of stock
– No contracts had been drawn up between Mr Ismail and his trading partners
– Goods exported did not have the adequate insurance
– The mobile phones traded in the UK did not meet the necessary specifications
– Mr Ismail, his suppliers and his customers all held bank accounts in the Netherlands Antilles

Mr Ismail also failed to conduct adequate VAT registration checks, despite receiving numerous warnings about the need to do so from HMRC.

Welcoming the court’s decision, Ken Beasley, official receiver of the public interest unit, said: “This was an attempt at a sophisticated and lucrative attack on the public purse which could have caused considerable losses to HM Revenue and Customs. Mr Ismail’s lengthy restriction reflects the severity of the misconduct perpetrated.”

So-called ‘carousel’ sales are not a victimless crime and HMRC will always investigate where it believes there is a good cause. If you are having difficulty paying HMRC taxes and need professional insolvency advice then call 08000 746 757 for a speedy effective response.

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