Leicester rag trade £1.3m tax evaders given jail terms

Directors of a Leicester clothing company that supplied high street and online retailers have been jailed for tax fraud of £1.3m.

Hifzurehman Patel, 40, and Ehsan-Ul-Haque Dawood Patel, 46, set up a sophisticated network of front companies to avoid VAT between 2014 and 2017.

They were caught after a rag trade task force made an unannounced visit to their Midlands Trading Ltd factory in December 2015.

The task force, which included officers from HMRC, became suspicious when staff timecards went completely missing during a factory tour, while the company also handed over fake invoices.

Investigators found the pair had diverted VAT obligations to a string of front companies, claiming to produce clothes on their behalf.

It meant they avoided paying £1.3 million in VAT on clothes they produced themselves and sold to unsuspecting retailers and online.

The pair were jailed for a total of nearly nine years at Leicester Crown Court on 17 May 2024. Hifzurehman Patel, of Evington Parks Road, Leicester, was jailed for five years after being convicted of conspiracy to evasion of VAT, contrary to section 1 (1) of the Criminal Law (1977) and two counts of money laundering.

Ehsan-Ul-Haque Dawood Patel, of Homeway Road, Leicester, was jailed for 47 months after being convicted of conspiracy to evade VAT contrary to section 1(1) of the Criminal Law (1977) and two counts of money laundering.

Mark Robinson, Head of Operations at HMRC’s Fraud Investigation Service, said: “Hifzurehman 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 has instead been 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 that tax cheats do not gain an unfair advantage over their law-abiding competitors.”

Paula Lloyd, a specialist prosecutor in the Crown Prosecution Service, said: “While other companies were doing the right thing by paying their taxes, these criminals thought they could enjoy a comfortable lifestyle paid for by hard-working taxpayers.

“The CPS will take them back to court to confiscate any assets or property they bought using the money from their crime.

“We are determined to ensure that tax evasion faces the full consequences and we hope this will make others think twice before doing the same.”

Three other people were convicted for their role in the fraud. Pravinbhai Purshotam Valland, 54, was given a two-year suspended sentence at Leicester Crown Court on 17 May 2024.

Mohsin Dawood Patel, 42, and Munaf Yusuf Banglawala, 62, will be sentenced in the same court on June 21, 2024.