The directors of a Leicester-based clothing company that supplied both high street and online retailers have been sentenced for committing a £1.3 million tax fraud.
Hifzurrehman Patel, 40, and Ehsan-Ul-Haque Dawood Patel, 46, established a complex network of front companies to evade VAT between 2014 and 2017.
Their fraudulent activities came to light when a specialist taskforce focused on the rag trade conducted an unannounced inspection at their Midlands Trading Ltd factory in December 2015. During the visit, officials from HM Revenue and Customs (HMRC) grew suspicious when staff clock cards went missing, and the business presented false invoices.
Investigations revealed that the pair had been redirecting VAT liabilities to various front companies, falsely claiming they were producing clothing for those companies. This scheme allowed them to evade paying £1.3 million in VAT on garments they actually manufactured and sold to unsuspecting retailers.
On May 17, 2024, at Leicester Crown Court, both men were sentenced to nearly nine years in prison. Hifzurrehman Patel received a five-year sentence for conspiracy to evade VAT and two counts of money laundering. Ehsan-Ul-Haque Dawood Patel was sentenced to 47 months for the same offenses.
Mark Robinson, Operational Lead in HMRC’s Fraud Investigation Service, stated: “Hifzurrehman and Ehsan Patel conducted a relentless attack on the tax system, creating fake contracts and forged documents to evade VAT. This money should have been supporting public services but was instead spent on luxury items.”
He added, “Tax fraud is not a victimless crime; it has significant repercussions for the services we all depend on. We are committed to ensuring that tax cheats do not gain an unfair advantage over law-abiding businesses.”
Paula Lloyd, Specialist Prosecutor at the Crown Prosecution Service (CPS), remarked, “While other businesses fulfilled their tax obligations, these individuals sought to live lavishly at the expense of hardworking taxpayers. We will pursue them in court to seize any assets acquired through their criminal activities.”