10 year disqualification for mobile phone company director for trading connected to £multi-million VAT fraud
Mr Manmohan Gurtata, director of Deandrake Ltd, a mobile phone wholesalers based in Ealing, London has been disqualified as a director for 10 years from 9 December 2014 for involving the company in a scheme linked to VAT fraud and making wrongful VAT reclaims against HM Revenue & Customs.
Disqualification serves to protect the public and in this case, has been achieved by Mr Gurtata (58), providing a legally binding undertaking to the Secretary of State for Business, Innovation & Skills, that he cannot promote, manage, or be a director of a limited company until 2024.
The disqualification is the culmination of an investigation by a specialist team of the Insolvency Service, commenced on the winding up of Deandrake Ltd, for an unpaid VAT owed to HM Revenue & Customs (HMRC).
The investigation uncovered that on 31 October 2006, Deandrake Ltd, bought mobile phones in the UK and other EC Countries, made onward sales of £1.1million to wholesalers in other EC countries and in Dubai. Deandrake then filed a VAT return with HMRC reclaiming UK VAT monies that missing traders earlier in supply chains had failed to pay when due to HMRC.
Deandrake acted as a broker, in this MTIC fraud trading scheme. A broker will export the goods to another EU member state. In the normal course of trading as result of selling to another member state, Deandrake would have been entitled to zero-rate its sales and reclaim VAT paid on its purchases. However in this case all trades were connected to fraudulent default losses.
However Deandrake’s 31 October 2006 trades all connected back to fraudulent default losses totalling £181,125 and its trading scheme bore several hallmarks of MTIC fraud. These included:
- the bulk wholesale trading of mobile phones, the high speed of trading, small size, high value goods
- lack of adequate insurance for the goods shipped
- shipping to a third party destination in another EU country from that of the customer
- very small and inflexible mark-ups for buffer trades v) unviably long supply chain
- back to back deals and no holding of stock
- the company, its customers and suppliers held a bank account with Fist Curacao International Bank based in the Netherlands Antilles’ or a successor bank.
Deandrake also failed to conduct sufficient VAT registration checks on its trading partners during the period of misconduct, despite receiving numerous warnings from HMRC about the need to do so.
Commenting on this case Paul Titherington, Official Receiver in the Public Interest Unit, said:
Deandrake Ltd was involved in trading and making wrongful reclaims in a fraudulent VAT scheme which had been costing the UK Exchequer significant amounts of money at the time the fraud was perpetrated.
This is not victimless misconduct, the main impact being on honest tax payers and their families who as a result suffered the effects of funding shortages in healthcare, education and other front line services.
Regulatory changes, investigative action and legal proceedings have reduced the scale of this fraud from 2007 onwards.
The Insolvency Service will not hesitate to use its enforcement powers to investigate and disqualify directors whose companies defraud the public purse.
Mr Gurtata was a sole director with responsibility for all aspects of the company’s trading.
This missing trader intra-community fraud is commonly known as “Carousel” fraud, as large consignments of electrical or other small item size high value goods are invoiced rapidly and repeatedly around trading chains, this being speeded up by movement on paper , with actual movement of goods only taking place as they enter or exit the UK.
Notes to Editors
Deandrake Ltd (CRO Number: 05528744) was incorporated on 5 August 2005. Its trading address has been 8 Beaufort Road, Ealing, London, W5 3EA.
The petition to wind up the company was presented by HM Revenue & Customs in respect of a debt of £20,376 for unpaid VAT tribunal costs. The winding up order was made against Deandrake Ltd on 18 September 2012.
Mr Manmohan Gurtata is of London and his date of birth is 23 July 1956.
On 18 November 2014, a 10 year Disqualification Undertaking was signed by Mr Gurtata.
On this basis, HMRC denied Deandrake’s reclaim and dismissing Deandrake’s appeal the VAT Tribunal’s judgment of 14 April 2011 stated:
We found that the fact that four transactions took place in one day towards the end of the month should have caused concern and set alarm bells ringing. The phones apparently passed through the hands of six traders based in three different EU countries in a single day. None of these transactions appeared to have added any value to the phones. We found that a reasonable person in the Deandrake’s position would not have regarded this as genuine arm’s length trading.
Mr Gurtata was operating in a business sector of which he knew nothing. This should have made him more vigilant and careful. It was no excuse to state that he was distracted. He went to all the meetings with the suppliers and HMRC. He instructed the accountants and met with experts in the field. He signed all the documents. After his meetings with and letters from HMRC he ought to have known that it was too good to be true to have four such lucrative transactions in mobile phones all on the same day on the last day of the VAT period.
Mr Gurtata had the means of knowing that there was no other reasonable explanation for the transactions other than a connection to a fraud.
A disqualification order has the effect that without specific permission of a court, a person with a disqualification cannot:
- act as a director of a company
- take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership
- be a receiver of a company’s property
In addition that person cannot act as an insolvency practitioner and there are many other restrictions are placed on disqualified directors by other regulations.
Disqualification undertakings are the administrative equivalent of a disqualification order but do not involve court proceedings.
Further information on director disqualifications and restrictions is available.
The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. It may also use powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK. In addition, the agency authorises and regulates the insolvency profession, deals with disqualification of directors in corporate failures, assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees, provides banking and investment services for bankruptcy and liquidation estate funds and advises ministers and other government departments on insolvency law and practice. Further information about the work of the Insolvency Service, and how to complain about financial misconduct, is available.
All public enquiries concerning the affairs of the company should be made to: The Official Receiver, Public Interest Unit (London), The Insolvency Service, 2nd Floor, 4 Abbey Orchard Street, London WC1B 3SS. Tel: 020 7637 6230 Email: firstname.lastname@example.org.
Published: 13 February 2015
From: The Insolvency Service