Rag trade fraudsters jailed for £1.3m VAT evasion

Ehsan-Ul-Haque Dawood Patel, left, and Hifzurrehman Patel were motivated by greed, a judge said

The bosses of a Leicester clothing firm have been jailed for a £1.3m tax fraud.

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

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

They both denied charges of fraudulently conspiring to evade VAT but were convicted after a trial at Leicester Crown Court last month.

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

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

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

Hifzurrehman 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.

Motivated by greed

The court heard the pair were the main players in the conspiracy but three more men, also from Leicester, facilitated the fraud by becoming the signatories on the bank accounts of shell clothing firms used by the defendants to recycle 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 money from Midland Trading Ltd for non-existent work which the then returned to Eshan and Hifzurrehman Patel.

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

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

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

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

Leicester Crown Court heard the Patels recruited and paid a number of "second rank" conspirators to aid their fraud

HMRC said work was underway to recover the unpaid VAT from the defendants.

Mark Robinson, operational lead in HMRC’s Fraud Investigation Service, said: “Hifzurrehman 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 was instead 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 tax cheats do not gain an unfair advantage over their law abiding competitors."