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By | OUT-LAW.COM 17th August 2005 07:55

Four found guilty of £40m VAT fraud

Mobile phone scam

Four people were found guilty at Maidstone Crown Court on Friday of involvement in a “carousel” VAT fraud that is estimated to have cost HM Revenue & Customs (HMRC) over £40 million over two years.

The four – Stephen Michael Pigott from Dubai, Stacey Haber-Hofberg from Hampshire, Joanna Cynthia Harris of London and Theresa Ifeyinwa Igbanugo, also of London – have been remanded in custody and will be sentenced on 9th September.

They were found to have participated in a type of fraud known as missing trader fraud, which occurs where fraudsters obtain VAT registration to acquire goods VAT-free from other Member States. They then sell on the goods at VAT inclusive prices and disappear without paying over the VAT paid by their customers to the tax authorities.

The most abusive form of the fraud is "carousel" fraud, where the same consignment of goods is sold through a series of contrived transactions back and forth between Member States in order to steal the sums charged as VAT every time the goods go around the circle.

On this occasion the fraud involved buying mobile phones from three fictitious companies and using false receipts to charge VAT on the transactions. The proceeds from this crime were then sent to the Hong Kong bank accounts of a number of companies created to perpetrate the fraud.

These companies were in fact clones of existing British-registered companies dealing mostly in mobile phones. The four accused issued fraudulent invoices in the names of the existing British companies, and VAT was charged on those invoices under their true VAT registration numbers.

The invoices were manufactured to resemble those used by the real companies, often by means of downloading logos and other details from the internet. Buyers were instructed to make payment to the Hong Kong accounts. The funds could then be electronically dispersed.

According to Assistant Chief Investigation Officer Deborah Hayman:

"This type of fraud is not a victimless crime and threatens the economic well-being of the country. This result sends a clear message that HMRC is committed to tackling the most serious organised crime that attacks our Revenue systems. Not only will we dismantle and prosecute these organisations, but we will vigorously pursue the recovery of their criminally derived assets."

HMRC and the Office for National Statistics issued a warning last week that the scam was so prevalent it was distorting the UK’s trade figures.

© Pinsent Masons 200-2005

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