Leicester textile company bosses jailed over massive VAT fraud scheme

The directors of a Leicester textile company set up fake sub-contractors to avoid paying £1.3 million in tax. Hifzurrehman and Ehsan-Ul-Haque Patel made clothes for companies including Boohoo, Primark and New Look.

But they pretended they were buying the clothes from elsewhere, creating fake invoices from companies that did not exist so they would not be liable to HMRC for large amounts of VAT- a company would normally owe the difference between any VAT paid to other businesses, and the VAT charged to customers. A government spokesperson described their actions as "a relentless and sustained attack on the tax system", and said the pair's ill-gotten gains had been spent on cars and property, when it should have gone towards public services.

The pair set up the company, Midlands Trading Ltd, in 2014. HMRC developed their first suspicions about the company the following year. During an unannounced inspection at the factory in Benson Street, Spinney Hills, Leicester, in 2015, the business handed over fake invoices while the specialist taskforce noticed that the factory workers' clocking-in cards "completely disappeared" during their visit.

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Hifzurrehman Patel, 40, of Evington Parks Road, Evington, Leicester, and Ehsan-Ul-Haque Dawood Patel, 46, of Uppingham Road, Leicester, had set up a sophisticated network of front companies to evade VAT and their fraud continued until 2017. Meanwhile, however, the government's specialist textile trade taskforce was compiling evidence against them, and found that by inventing fake companies the pair were able to evade paying huge amounts of VAT.

They claimed the clothes were made elsewhere but really they were producing the clothes themselves and selling them on to unsuspecting high street and online retailers, thereby reducing their own VAT liability.

Midlands Trading Ltd had a factory in Benson Street, Spinney Hills
Midlands Trading Ltd had a factory in Benson Street, Spinney Hills -Credit:Google

The pair appeared at Leicester Crown Court on Friday, May 17. Hifzurrehman Patel had gone on trial last month and been found guilty by a jury of conspiracy to evade VAT and two counts of money laundering. He was jailed for five years.

Ehsan-Ul-Haque Patel was sentenced to 47 months in prison after pleading guilty to the same three charges.

A third man, Pravinbhai Valland, 54 of Roberts Road, Belgrave, Leicester, was sentenced to 24 months in prison, suspended for two years, after admitting conspiracy to evade VAT. He will have to carry out 300 hours of unpaid work and a three-month curfew, requiring him to stay at home during certain hours of the day.

Mark Robinson of HMRC’s Fraud Investigation Service, said after the cases had concluded: “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."

The Crown Prosecution Service will be taking action to confiscate any goods or assets they bought using money from their offending, said a spokesperson. Anyone with information about tax fraud can contact HMRC online.