Rafiuddin Ismail also known as Rafiuddin Ahmed Ismail, unemployed of Nuneaton, Warwickshire has received a 14 year bankruptcy restriction for being involved in a scheme linked to VAT fraud and for submitting wrongful VAT reclaims to HM Revenue & Customs (HMRC).
Mr Ismail’s restriction, from 4 March, follows an investigation by a specialist team of the Insolvency Service which commenced on the making of the bankruptcy order on 19 March 2014, following a petition presented by HMRC.
Mr Ismail, 42, was a wholesaler of mobile telephones and other electronic items trading under the name Swiss Gulf.
The investigation uncovered that between 13 March 2006 and 27 June 2006, Mr Ismail purchased goods in the UK and made onward sales of over £74m to wholesalers in the EU. Mr Ismail then filed VAT returns attempting to reclaim VAT in excess of £12.7m. This amount was disallowed by HMRC as ’missing traders’ earlier in the supply chains had failed to pay VAT when due.
Mr Ismail acted as a broker in this Missing Trader Intra-Community (MTIC) VAT fraud scheme. A broker exports the goods to another EU member state. In the normal course of trading as a result of selling goods to another member state, Mr Ismail would have been entitled to zero-rate his sales and reclaim the VAT paid on his purchases. However, in this case all of Mr Ismail’s transactions were traced back to traders who had defaulted on their VAT payments to HMRC, resulting in tax losses circa £12m.
There were significant aspects of Mr Ismail’s wholesale trading which bore the hallmarks of MTIC VAT fraud. These included:
- all of the deals in question were traced back to tax losses
- all of the deals were back to back with no holding of stock
- there were no written contracts with Mr Ismail’s trading partners
- lack of adequate insurance for the goods being exported
- the mobile telephones were not made to UK specifications, yet they were being traded in the UK
- the other electronic goods that were traded contained English manuals, yet they were sold to customers in countries where English was not the first language
- Mr Ismail, his suppliers and his customers, all held accounts with the First Curaçao International Bank (“FCIB”), located in the Netherlands Antilles. On 9 October 2006, FCIB accounts were frozen by the Central Bank of the Netherlands on the suspicion that FCIB had aided financial fraud.
Mr Ismail also failed to conduct adequate VAT registration checks and other due diligence on his trading partners despite receiving numerous warnings from HMRC about the need to do so. The due diligence conducted was insufficient to protect him from becoming involved in transaction chains tainted with MTIC VAT fraud.
Commenting on this case Ken Beasley, Official Receiver of the Public Interest Unit (North), said:
This was an attempt at a sophisticated and lucrative attack on the public purse which could have caused considerable losses to HM Revenue and Customs.
Mr Ismail’s lengthy restriction reflects the severity of the misconduct perpetrated.
MTIC VAT fraud is commonly known as ‘Carousel’ fraud. Large consignments of high value, low bulk and electronic goods such as mobile telephones and computer components are invoiced rapidly and repeatedly around trading chains, with actual movement of goods only taking place as they enter or exit the UK. The imported goods may be sold from one trader to another, and eventually exported. When this happens, the exporter can claim back from HMRC the whole of the VAT that should have been paid on the goods (as exports are zero-rated). However, if there is a ‘missing trader’ further back in the chain of sales, part of this VAT was never paid in the first place. Hence, there is a loss to HMRC. This process can repeat many times, with the goods going round in a ‘carousel’.
Notes to Editors
The bankruptcy order was made on 19 March 2014 following a petition presented by HMRC on 21 November 2013.
Rafiuddin Ismail is of Nuneaton, Warwickshire and his date of birth is 24 April 1972.
On 2 March 2015, Rafiuddin Ismail signed a 14 year bankruptcy restriction undertaking (BRU). This was accepted by the Secretary of State for Business, Innovation and Skills on 4 March 2015. The bankruptcy restrictions apply from 4 March 2015 until 3 March 2029.
If the Official Receiver considers that the conduct of a bankrupt has been dishonest or blameworthy in some other way, he (or she) will report the facts to court and ask for a Bankruptcy Restrictions Order (BRO) to be made. The court will consider this report and any other evidence put before it, and will decide whether it should make a BRO. If it does, the bankrupt will be subject to certain restrictions for the period stated in the order. This can be from 2 to 15 years.
The bankrupt may instead agree to a Bankruptcy Restrictions Undertaking (BRU) which has the same effect as an order, but will mean that the matter does not go to court.
There are restrictions set out in insolvency law that the bankrupt is subject to until they are discharged from bankruptcy – normally 12 months - and include that bankrupts:
- must disclose their status to a credit provider if they wish to get credit of more than £500
- who carry on business in a different name from the name in which they were made bankrupt, they must disclose to those they wish to do business with the name (or trading style) under which they were made bankrupt
- may not act as the director of a company nor take part in its promotion, formation or management unless they have a court’s permission to do so
- may not act as an insolvency practitioner, or as the receiver or manager of the property of a company on behalf of debenture holders
- may not be a Member of Parliament in England or Wales
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 bankrupt should be made to: The Official Receiver, Public Interest Unit (North), The Insolvency Service, 2nd Floor, 3 Piccadilly Place, London Road, Manchester, M1 3BN. Tel: 0161 234 8531 Email: PIU.North@insolvency.gsi.gov.uk.
Published: 26 March 2015
From: The Insolvency Service