Six men have been jailed for terms of up to nine years for a fraud operation that deprived HM Revenue and Customs of an estimated £22m in Value Added Tax and Construction Industry Scheme contributions.
The defendants – described by Kent Police as part of an organised crime gang – were involved in the setting up of a building-construction core company that invoiced customer companies for the supply of labour, which included VAT elements on the bills.
The customer companies would pay the invoices but the construction company would not pay the VAT and CIS contributions to HMRC. The unpaid VAT and scheme contributions were diverted to the bank accounts of the defendants.
Lead conspirators Philip Bailey, 36, Daniel Newton, 38, and Sean Dean 41, were responsible for establishing, maintaining, and developing the fraud. Kevin Ratcliffe, 43, was a customer company director who received kickbacks in exchange for providing business to the core company.
Lee Hudson, 56, was an office worker conducting the day-to-day business that enabled the offences. Bradley Mortimer, 39, functioned as a "cash courier for money laundering" for the operation.
A seventh defendant, 41-year-old Sarah Gillard, was found guilty of acquiring criminal property but avoided jail when she was sentenced at Southwark Crown Court this week.
The fraud came to light after Bailey was arrested in April 2020 and investigated for firearms, theft and money-laundering offences – a process that revealed he was a criminal accountant.
Kent Police said investigations conducted with HMRC had found that in addition to its tax-fraud operations, the group was also running a profitable money laundering scheme for criminal associates. The force said that more than £2m had been linked to a "large scale drug supply network" across the South East.
Julius Capon, of the Crown Prosecution Service's Serious Economic, Organised Crime and International Directorate, said the seven criminals had stolen £22m from the taxpayer.
"Fake payroll companies were created and operated by Bailey, Newton, Hudson, and Dean," he said. "Construction companies would permit these payroll companies to make VAT and CIS contributions to HMRC on behalf of their sub-contractors. Instead of the VAT and CIS contributions being paid to HMRC, the defendants pocketed the monies themselves.
"The defendant Ratcliffe owned a construction firm which received cash kickbacks for assisting in this illegal enterprise of cheating the revenue. The defendants Gillard – partner of Philip Bailey – and Mortimer laundered the proceeds through their bank accounts.
"This is money that is needed to help support our hard-pressed public services."
Capon said the CPS had commenced proceeds-of-crime proceedings against the defendants to claw back the money they made from the illegal scheme.
Ian Hackett, operational lead of HMRC’s Fraud Investigation Service, said the seven defendants had perpetrated a "sophisticated and complex fraud".
"The tenacity and expertise of the investigators involved in this joint investigation has protected millions of pounds of taxpayers’ money, which is needed to fund our public services," he said. "We encourage anyone with information about any type of tax fraud to report it to HMRC."
Bailey, of Beechwood Gardens, Meopham, pleaded guilty to one count of conspiracy to cheat the public revenue and one count of conspiracy to disguise, transfer, convert or conceal criminal property. He was sentenced to six years and three months in jail.
Newton, of Whitefriars Wharf, Tonbridge, pleaed guilty to conspiracy to cheat the public revenue and conspiracy to disguise, transfer, convert or conceal criminal property. He was sentenced to nine years and four months in jail.
Dean, of London Road, Teynham, pleaded guilty to one count of conspiracy to cheat the public revenue and was sentenced to seven years in jail.
Hudson, of Ordinance Way, Ashford, was found guilty of two counts of conspiracy to cheat the public revenue and sentenced to five years in jail.
Mortimer, of Chelsfield Lane, Orpington, was found guilty of one count of participating in activities of an organised crime group and one count of entering into a money laundering arrangement. He was jailed for three years and six months.
Ratcliffe, of Longhill Road, Ovingdean, Brighton, was found guilty of one count of cheating the public revenue and one count of acquiring criminal property. He was jailed for 27 months.
Gillard, of Beechwood Gardens, Meopham, was found guilty of acquiring criminal property and sentenced to two years imprisonment, suspended for two years.