Leicester textile bosses jailed over massive VAT fraud scheme

Directors of a Leicester textile company created fake subcontractors to avoid paying £1.3m in tax. Hifzurehman and Ehsan-Ul-Haque Patel have made clothes for companies such as Boohoo, Primark and New Look.

But they pretended to buy the clothes from elsewhere, fraudulently creating fake invoices from companies that didn’t exist, so they wouldn’t be liable for VAT. A government spokesman 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 they should have gone to public services.

The pair set up the company, Midlands Trading Ltd, in 2014. HMRC developed its first suspicions about the company the following year. During an unannounced inspection of the factory in Benson Street, Spinney Hills, Leicester, in 2015, they noticed that the registration cards of factory workers were suddenly hidden from view halfway through their visit.

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Hifzurehman Patel, 40, of Evington Parks Road, Evington, Leicester, and Ehsan-Ul-Haque Dawood Patel, 46, of Uppingham Road, Leicester, set up a sophisticated network of front companies to evade VAT , and their fraud continued until 2017. Meanwhile, however, the government’s textile trade task force was gathering evidence against them and found that by inventing fake companies, the two managed to avoid paying huge amounts of VAT .

They claimed the clothes were made elsewhere, but they were actually making the clothes themselves and selling them to unsuspecting retailers and online. LeicestershireLive has asked HM Revenue & Customs for more information about the scam and is awaiting a response.

The pair appeared at Leicester Crown Court on Friday, May 17. Hifzurehman Patel went on trial last month and was found guilty by a jury of conspiracy to evade VAT and two counts of money laundering. He was sentenced to five years in prison.

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 jailed for 24 months, 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 period requiring him to stay at home during certain hours of the day.

Mark Robinson of HMRC’s Fraud Investigation Service, said after the cases concluded: “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 helped 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 work hard to provide. tax cheats do not gain an unfair advantage over their law-abiding competitors.”

The Crown Prosecution Service will take steps to seize any assets or property they bought using their crime money, a spokesman said. Anyone with information about tax fraud can contact HMRC online.