15 year disqualifications for mobile phone company directors over multi-million VAT fraud
Brothers Waseem and Ajaz Saddique, directors of Winnact Ltd, mobile phone wholesalers based in Birmingham have been disqualified as director by the High Court for 15 years each at hearings on 7 May and 23 July for involving the company in a scheme linked to VAT fraud and making wrongful VAT reclaims against HM Revenue & Customs.
The disqualifications are as a result of investigations by a specialist team of the Insolvency Service, following the winding up of Winnact Ltd, for debts owed to HM Revenue & Customs, for unpaid VAT.
The disqualifications mean that they cannot promote, manage, or be a director of a limited company until 2029.
Commenting on this case Paul Titherington, Official Receiver in the Public Interest Unit, said:
Winnact 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 a victimless crime, 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.
The investigation uncovered that between May and September 2006, Winnact Ltd, bought mobile phones in the UK and other EC Countries, made onward sales of £29.2 million to wholesalers in the UK and onward sales of £41.4 million to wholesalers in other EC countries and in Dubai. Winnact then filed monthly returns with HMRC “reclaiming” UK VAT monies that ‘missing traders’ earlier in supply chains had failed to pay when due to HMRC.
This “Missing Trader Intra-Community” (“MTIC”) 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, speeded up by movement on paper , with actual movement of goods only taking place as they enter or exit the UK.
The court heard that the companies entered into trading arrangements which were “too good to be true”, and against which they had been expressly and repeatedly warned by HMRC.
Such missing trader fraud indicators included, the rapid succession of same day trades without deliveries within the UK of goods sitting at a shared freight forwarder, the common use of the same offshore bank, and entering into payment arrangements involving third parties who were neither suppliers nor customers. All traders banked with the First Curacao International Bank which was shut down by the Netherlands Antilles authorities in September 2006 in order to prevent money laundering.
WInnact Ltd acted as a “contratrader”, in this MTIC fraud trading scheme. A contratrader plays the role of matching and offsetting input and output VAT from purchases and sales in different trading chains. This has the effect of moving and dissociating the role of making a wrongful reclaim to a “broker” into a separate “clean” chain from the default losses generated by an “acquirer” in a “dirty chain”. Winnact Ltd took part in a complex and orchestrated scheme whereby VAT returns were ‘staggered’ by multiple contratraders over a period of time in order to hide the £multimillion VAT default of a single trader.
The court heard that as the director with responsibility for all aspects of the company’s trading, Waseem Saddique was involved in pricing decisions which ran against any commercial logic and could only be explained in terms of this fraudulent scheme.
The court heard that Winnact Ltd failed to conduct any VAT registration checks on its trading partners during the period of misconduct, despite receiving numerous warnings from HMRC about the need to do so.
The court concluded that Waseem Saddique was actively involved and his brother Ajaz either knew of the fraud or sat back and let Winnact involved itself. Either way he was plainly a danger to the public, and for the protection of the public both directors should be subject to the maximum period of disqualification.
Notes to Editors
Winnact Ltd (CRO Number: 04922355) was incorporated on 6 October 2003. Its trading address has been 756 Bordesley Green, Birmingham, B9 5PQ.
The petition to wind up the company was presented by HM Revenue & Customs in respect of a debt of £5,251,277 for unpaid VAT. The winding up order was made against Winnact Ltd on 19 September 2011.
On 7 May 2014 a 15 year Disqualification Order was made at the High Court against Waseem Saddique. (Date of birth: 9 August 1977).
On 23 July 2014 a 15 year Disqualification Order was made at the High Court against Ajaz Saddique. (Date of birth: 3 December 1968).
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;
- act as an insolvency practitioner; or
- be a receiver of a company’s property.
In addition many other restrictions are placed on disqualified directors by other regulations.
Further information on director disqualifications and restrictions can be found at https://www.gov.uk/government/collections/information-about-company-director-disqualification
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 from:
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Published: 9 September 2014
From: The Insolvency Service