15-year director ban over multimillion pound VAT fraud
13 Jun 2018
A director involved in a multimillion VAT fraud has been given a maximum 15-year disqualification following an investigation by the Insolvency Service into a ‘missing trader’ transaction chain
13 Jun 2018
Ulhaque Ahtamad was the sole director of Masstech Ltd, a carbon emissions allowance and metals trader based in Gerrards Cross, Buckinghamshire. HMRC presented a petition to wind up the company in February 2013 for £7,484,940 in respect of unpaid VAT.
A subsequent investigation uncovered that between June and September 2009 Masstech Ltd made sales of more than £38m in the wholesale trade of carbon emission allowances and metals with little initial finance in place.
The company then filed quarterly returns with HMRC attempting to fraudulently reclaim UK VAT that ‘missing traders’ earlier in supply chains had failed to pay to HMRC.
This was part of a missing trader intracommunity (MTIC) fraud, where Masstech Ltd acted as a ‘buffer’ trader. The buffer is an intermediate trader between at one end the ‘missing trader’, importing goods and not paying over VAT due to HMRC, and at the other end, the exporter seeking to reclaim VAT that had not been paid. Buffers serve to increase the distance between the ends of the chain so that the exporter can deny knowledge of the default.
However, it was found that Ahtamad obstructed HMRC and repeatedly stalled their investigations into the company’s trading. The High Court, when considering whether he should be disqualified, heard that Masstech Ltd entered into trading arrangements which were ‘too good to be true’, and against which the company had been expressly and repeatedly warned by HMRC.
Ahtamad made payments to unconnected third parties totalling at least £7.38m, despite having been warned on more than one occasion by HMRC officers of the risks of third party payments in the context of MTIC fraud.
The VAT fraud, including wrongful VAT reclaims against HMRC, resulted in tax losses of over £7.1m.
The court also heard that as the sole director with responsibility for all aspects of the company’s trading, Ahtamad was involved in pricing decisions which ran against any commercial logic and could only be explained in terms of this fraudulent scheme.
In addition, VAT registration and other due diligence checks on trading partners were superficial and inadequate and Ahtamad failed to act on standard commercial risk negative indicators and continued to trade regardless.
The court concluded that Ahtamad must have been a knowing participant in this scheme and that a 15-year ban, the maximum period of disqualification, was appropriate.
Justin Dionne, Official Receiver for the Insolvency Service, said: ‘Masstech Ltd was involved in trading and making wrongful reclaims in a fraudulent VAT scheme which had been costing the UK Exchequer significant amounts of money at the time the fraud was perpetrated.
‘Regulatory changes, investigative action and legal proceedings have reduced the scale of this fraud from 2007 onwards.’
Report by Pat Sweet