£120, 000 VAT scam exposed: HMRC sentences small business owner
A clothing wholesaler from Rochdale has been sentenced by HMRC after forging documents to steal almost 120, 000 in VAT repayments.
Abdul Majeed, former company secretary of Rochdale clothing businesses Majtex Limited and Majtex International Limited, faked invoices to fraudulently reclaim 119, 624 in VAT repayments between April 2006 and April 2014. 14, 353 was withheld.
How did he do it?
An investigation by HMRC revealed that the clothing wholesaler had created templates from legitimate supplier invoices, which he then used to create fake sales and purchase documents. Majeed then used the counterfeit invoices to demonstrate additional? UK and overseas sales and purchases.
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The fraudulent invoices raised alarm bells within HMRC, which offered Majeed the opportunity to disclose any tax irregularities within 60 days. This process is known as Contractural Disclosure Facility, which enables those suspected of tax fraud to make a full and accurate disclosure to HMRC of all in their tax affairs, which can be dealt with via civil recovery processes.
What is invoice fraud?
Majeed’s VAT scam attempted to defraud the tax office, but the threat of invoice fraud to micro business owners is increasing.
False invoices could be submitted by third parties impersonating genuine suppliers, or even employees in some cases, in an attempt to deceive firms into making payments to fraudulent accounts.
Procurement fraud costs UK businesses 121.4bn every year, and fraudsters are becoming increasingly sophisticated. We asked two experts what tactics business owners need to be aware of.
Majeed ignored the offer, which led HMRC to launch a criminal investigation into his two firms and the suspected VAT evasion. Majeed deregistered Majtex International Limited for VAT soon after.
The fraudster was initially arrested in February 2015 on suspicion of VAT fraud and pleaded guilty for the offence at Manchester Crown Court on 3 April 2018.
Sentencing was adjourned after Majeed committed to pay back 10, 000 by the end of April 2018 and make continued monthly payments.
He was sentenced on October 2018 to a two-year suspended jail sentence, 150 hours community service and a compensation order of 70, 271. He was also ordered to pay costs of 3, 000. Majeed has repaid 35, 000 so far and was ordered to complete the payments within the next 18 months.
Commenting on the verdict, Paul Maybury, assistant director at HMRC’s Fraud Investigation Service, said: Majeed has finally admitted his crime and is paying for his greed. He had the opportunity to put his tax affairs in order and not be criminally investigated, but he ignored HMRC and now has a criminal conviction for tax evasion.
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