VAT fraud trader gets record 15-year sentence

The UK's longest ever prison sentence for carousel fraud was handed down by a court on 21st December 2006 following a six-year investigation by Revenue and Customs.  Simon Draycott QC and Jenny Goldring appeared for the Prosecution in 2 separate but linked trials. Eight of the nine Defendants prosecuted were convicted.

The principal Defendant, Emmanuel Hening, a trader with dual French and Belgian nationality, was given 15 years after being found guilty at Worcester crown court of defrauding the government of VAT revenue totalling £54 Million. The presiding Judge, His Honour Judge McCreath described Mr Hening's fraud as "an orchestrated attack on the United Kingdom VAT system".

One Defendant tried to flee the UK between verdict and sentencing. Police apprehended him at the Channel Tunnel on his way to India via Paris.  

This fraud is commonly known as MTIC, Carousel or Missing trader fraud. It exploits the VAT-free status of goods traded within the European Union as well as the high VAT tax levels levied on goods such as mobile phones and other electronic equipment.

Simon Draycott QC and Jenny Goldring have particular expertise in this type of fraud having been involved not only in these 2 cases but also 2 other substantial cases involving total loss to the revenue of over £100 million. The fraud concerned the importation of mobile phones. The essence of the fraud was that a trader in the United Kingdom would register for VAT. The trader would acquire or purport to acquire mobile phones from outside the United Kingdom but inside the European Community. In this case, the other European countries involved were Luxembourg and Spain. Phones bought in this way are bought without the trader having to pay any VAT on them. The trader would then sell or purport to sell on the phones and purport to charge VAT. The ‘VAT’ which was collected should have been accounted for to the Customs and Excise. Instead the VAT was off set by the trader pretending that he had bought the phones not from a European country but from another UK company and had paid VAT for the phones.  This pretence, supported by invoices, virtually extinguished the traders VAT liability.  The UK company that had apparently supplied the phones never paid any VAT and simply went missing. 

"This was not some victimless kind of crime, but organised fraud on a massive scale perpetrated by criminals all bent on making fast and easy profits at the expense of the British taxpayer," said Chris Harrison, deputy director for investigation at HMRC.

The severe sentence came after months of growing government alarm over the impact of carousel schemes on fiscal revenue. In September, a Belgian taskforce concluded the UK was harder hit by carousel fraud than any other EU nation, and had lost £8.4bn through VAT-dodging schemes in the 12 months from June 2005 to June 2006.