The director of Comveen Ltd, a mobile phone wholesaler based in Luton, Bedfordshire, has been disqualified as a director for 13 years for her part in a lucrative VAT fraud. Monica Davies will not be permitted to promote, manage or act as the director of a limited company until 2027.
The disqualification, which came into force on 17 December 2014, follows an investigation by a specialist Insolvency Service team charged with revealing the full extent of VAT payments owing to HMRC.
Wrongful VAT reclaims totalling £834,334
The investigation revealed that between 10 March 2005 and 6 December 2006, the mobile phone retailer bought and sold mobile phones in the UK with sales totalling £122million. This included £106million of sales to other UK wholesalers, and over £15million to retailers in other European Community (EC) countries.
In an elaborate example of a ‘carousel fraud’, Comveen Ltd then filed quarterly returns with HM Revenue and Customs, reclaiming VAT of £834,334 which the company alleged was money ‘missing traders’ had failed to pay earlier in the supply chain.
However, the fraudulent reclaims were refused by HMRC. Comveen’s appeal against this decision was denied by the VAT Tribunal, given the unmistakeable similarities between the trading scheme and Missing Trader Intra Community Fraud (MTIC).
Lorries purportedly full of mobile phones were empty
Monica Davies’ part in the scheme was to sanction payments to unconnected third parties amounting to at least £17.3million.
HMRC Officers launched covert inspections of lorries paid for by Comveen Ltd, which were purportedly full of mobile phones destined for retailers in EU countries. However, the inspections revealed the lorries were empty, and despite making payment in full the intended recipients did not receive any goods.
Comveen Ltd then began a window-dressing exercise involving a series of VAT registration checks on its trading partners. However, the company continued to trade with its partners even after HMRC had advised it of failed verifications and invalid VAT numbers.
The fraudulent evasion of VAT
The VAT Tribunal judgement found HMRC were correct in their decision to refuse Comveen’s claims, given that “the only reasonable explanation for the transactions was the fraudulent evasion of VAT”.
MTIC or carousel fraud is the abuse of VAT rules on cross-border transactions within the EU. It relies on the fact that no VAT is chargeable on these transactions and often involves large consignments of electrical or other small high value items.
The fraud centres on the rapid and repeated invoicing of goods around trading chains, with the actual movement of goods only taking place as they enter or exit the UK.
There were a number of factors that indicated Comveen Ltd was engaged in such a fraud. These included:
- The rapid succession of same day trades without making deliveries within the UK;
- The use of the same offshore bank as other companies involved in the trades;
- Entering into payment arrangements involving third parties who were neither customers nor suppliers.
Strong action against directors who defraud the public purse
Commenting on the case, Paul Titherington, official receiver in the Insolvency Service’s Public Interest Unit, said: “Comveen Ltd was involved in trading and making wrongful reclaims in a fraudulent VAT scheme which cost the UK Exchequer significant amounts of money.
“This is not victimless conduct, with the main impact felt by honest taxpayers and their families who suffered the effects of funding shortages in education, healthcare and other front line services. Regulatory changes, investigative action and legal proceedings have reduced the scale of this fraud from 2007 onwards.
“The Insolvency Service will not hesitate to use its enforcement powers to investigate and disqualify directors whose companies defraud the public purse”.
If you are concerned that your company is trading whilst insolvent and or afraid of defaulting on HMRC VAT time to pay arrangement call 08000 746 757 or use the live chat to speak to someone whilst online.
Written by: Mike Smith