The directors of a Leicester clothing company that supplied high street and online retailers have been jailed for a £1.3m tax fraud.
Hifzurrehman Patel, 40, and Ehsan-Ul-Haque Dawood Patel, 46, set up a sophisticated network of front companies to evade VAT between 2014 and 2017.
They were caught after a specialist rag trade taskforce made an unannounced visit to their Midlands Trading Ltd factory in December 2015.
The taskforce, which included officers from HMRC, became suspicious when staff clock cards completely disappeared during a tour of the factory while the business also handed over false invoices.
Investigators discovered the pair had been diverting VAT liabilities to a string of front companies, by claiming they produced clothes on their behalf.
It meant they evaded paying £1.3m of VAT on the clothes they were in fact producing themselves and selling on to unsuspecting high street and online retailers.
The pair were jailed for a total of nearly nine years at Leicester Crown Court on 17 May 2024. Hifzurrehman Patel of Evington Parks Road, Leicester, was sentenced to five years in prison having been convicted of conspiracy to evade VAT, contrary to section 1(1) of the Criminal Law Act (1977), and two counts of money laundering.
Ehsan-Ul-Haque Dawood Patel, of Homeway Road, Leicester, was sentenced to 47 months in prison having been convicted of conspiracy to evade VAT, contrary to section 1(1) of the Criminal Law Act (1977), and two counts of money laundering.
Mark Robinson, Operational Lead in HMRC’s Fraud Investigation Service, said: “Hifzurrehman and Ehsan Patel carried out a relentless and sustained attack on the tax system. They invented contracts and forged documents to evade VAT. This is money that should have been helping to fund our public services and was instead spent on cars and property.
“Tax fraud is not a victimless crime. It has real consequences for the public services we all rely on and we are working hard to ensure tax cheats do not gain an unfair advantage over their law abiding competitors.”
Paula Lloyd, Specialist Prosecutor in the Crown Prosecution Service, said: “While other businesses were doing the right thing by paying their taxes, these criminals thought they could enjoy a cushy lifestyle paid for hardworking taxpayers.
“The CPS will be taking them back to court to confiscate any goods or assets they bought using money from their offending.
“We are determined to ensure tax dodgers face the full consequences and hopefully this will make others think twice before they do the same.”
A further three people were convicted for their roles in the fraud. Pravinbhai Purshotam Valland, 54, was handed a suspended two-year prison sentence at Leicester Crown Court on 17 May 2024.
Mohsin Dawood Patel, 42, and Munaf Yusuf Banglawala, 62, will be sentenced at the same court on 21 June 2024.
