Former mobile phone wholesalers banned for 15 years after multi-million VAT fraud
TWO mobile phone wholesalers based in Birmingham have been disqualified from being company directors for 15 years by the High Court after they involved their firm in a multi-million pound VAT fraud.
The disqualification of brothers Waseem and Ajaz Saddique, both directors of Winnact Ltd, followed an investigation by officers of the Insolvency Service after the winding up of Winnact Ltd, for debts owed to HM Revenue & Customs for unpaid VAT.
The petition to wind up the company was presented by HMRC in respect of a debt of £5,251,277 for unpaid VAT.
The disqualifications mean that they cannot promote, manage, or be a director of a limited company until 2029.
Paul Titherington, Official Receiver in the Public Interest Unit, said: “Winnact 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.”
The investigation uncovered that between May and September 2006, Bordesley Green-based Winnact Ltd, bought mobile phones in the UK and other EC countries, made onward sales of £29.2m to wholesalers in the UK and onward sales of £41.4m to wholesalers in other EC countries and in Dubai.
Winnact then filed monthly returns with HMRC fraudulently reclaiming UK VAT that supposed ‘missing traders’ earlier in supply chains had failed to pay when due to HMRC.
This Missing Trader Intra-Community (MTIC) fraud is commonly known as ‘Carousel’ fraud, as large consignments of electrical or other small, high value goods are invoiced rapidly and repeatedly around trading chains, speeded up by movement on paper , with actual movement of goods only taking place as they enter or exit the UK.
The court heard that the companies entered into trading arrangements which were “too good to be true”, and against which they had been expressly and repeatedly warned by HMRC.
Such missing trader fraud indicators included, the rapid succession of same day trades without deliveries within the UK of goods sitting at a shared freight forwarder, the common use of the same offshore bank, and entering into payment arrangements involving third parties who were neither suppliers nor customers. All traders banked with the First Curacao International Bank which was shut down by the Netherlands Antilles authorities in September 2006 in order to prevent money laundering.
Winnact Ltd acted as a ‘contratrader’ in this MTIC fraud trading scheme. A contratrader plays the role of matching and offsetting input and output VAT from purchases and sales in different trading chains.
Winnact Ltd took part in a complex and orchestrated scheme whereby VAT returns were ‘staggered’ by multiple contratraders over a period of time in order to hide the multi-million pound VAT default of a single trader.
The court heard that as the director with responsibility for all aspects of the company’s trading, Waseem Saddique was involved in pricing decisions which ran against any commercial logic and could only be explained in terms of this fraudulent scheme.
Winnact Ltd failed to conduct any VAT registration checks on its trading partners during the period of misconduct, despite receiving numerous warnings from HMRC about the need to do so.
The court concluded that Waseem Saddique was actively involved and his brother Ajaz either knew of the fraud or sat back and let Winnact involve itself.
