Leicester rag trade fraudsters jailed for £1.3m VAT evasion

Bosses at a Leicester clothing firm have been jailed for £1.3million tax fraud.

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

The pair, from Leicester, were arrested after a joint investigation by a specialist rag trade task force, which included HM Revenue and Customs (HMRC) officers.

Both denied charges of fraudulent conspiracy to evade VAT but were convicted after a trial at Leicester Crown Court last month.

The Patels were factory directors of Midland Trading Ltd, which supplied well-known online retailers including Primark, New Look, BooHoo and Misguided.

The court heard they committed large-scale fraud by creating a large number of fake invoices to make it appear they were outsourcing work to front companies who in reality employed no staff and did no work.

Prosecutors said this allowed them to avoid paying VAT on clothing they produced themselves, which was then sold to unsuspecting retailers.

Hifzurehman Patel, 40, of Evington Parks Road, was given a five-year prison sentence.

Eshan Patel, 46, of Homeway Road, was jailed for three years and 11 months.

The court heard the pair were the main players in the conspiracy, but three other men, also from Leicester, facilitated the fraud by becoming signatories on bank accounts of shell clothing firms used by the defendants to launder cash.

Pravinbhai Valland, 54, of Roberts Road, Moshin Patel, 42, of St Saviour’s Road, and Munaf Banglawala, 63, of Blanklyn Avenue, all pleaded guilty to conspiracy to evade VAT.

The court heard they were paid to put up money from Midland Trading Ltd for non-existent work which they then returned to Eshan and Hifzurehman Patel.

Sentencing Banglawala and Moshin Patel on Friday, Judge Steven Evans said: “All of this was motivated by one factor and that was greed.”

The judge told them that the evaded VAT would have been used to fund public services such as schools and hospitals.

Moshin Patel and Valland were given two-year suspended prison terms, three-month overnight curfews and ordered to do 300 hours of unpaid work.

Banglawala was given a 10-month prison sentence, suspended for one year, and ordered to do 150 hours of unpaid work

HMRC said it was working to recover the unpaid VAT from the defendants.

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 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 we are working hard to ensure that tax cheats do not gain an unfair advantage over their law-abiding competitors.”