Liquor trader linked with £34.2m VAT scam

Liquor trader linked with £34.2m VAT scam

Jun 3, 2024

A personal liability notice (PLN) for £75,000 was issued to the director of a company selling alcohol to cash and carry outlets for deliberately avoiding VAT

The case at the First Tier Tribunal related to 179 transactions between Drinks 4 Less Limited and suppliers involved in an ‘organised crime group’, where eight members were convicted of missing trader fraud and given jail sentences for between six and nine years in 2019.

When the company went into liquidation, Anandpreet Singh Powar was the sole director of Drinks 4 Less.

Before its liquidation on 16 November 2023, HMRC had turned down a claim from the company for a deduction in input tax of £186,694.46 on 3 March 2017. HMRC then issued an assessment for £182,455 against the company on 17 July 2017.

A penalty notice of £83,019.70 was also issued ‘on the basis that the 179 transactions were connected to a fraudulent loss of VAT and that the company knew or should have known of that’.

Drinks 4 Less appealed against both of these assessments in 2017 but later withdrew the appeals on 12 January 2024.

HMRC foresaw the company was likely to become insolvent and therefore on 22 June 2017 it issued a PLN to Powar himself as he was the sole company director, and so responsible for any VAT issues.

However, the PLN was reduced to £74,823.63 as ‘HMRC accepted that it could not be established that 45 of the deal chains could be traced back to a fraudulent loss of tax’.

Powar represented himself at the hearing and was described as ‘not a wholly reliable witness’ by tribunal judge Kerrie Brooks. HMRC officer Jennifer Howse also gave evidence as she was the investigating officer for the company from 2018 until 2023.

Evidence from Powar was ‘inconsistent’ as he would remember certain facts that would benefit himself but matters which occurred around the same time, he had no recollection of.

When the company was first incorporated in 2011 there were two more directors along with Powar, but the appellant had already said in evidence he was solely responsible for all trading activities.

He also said he gained his knowledge of the alcohol industry when he worked for Great Western Cash and Carry. Although he did not do any of the administrative tasks, he claimed to have learned which products were ‘fast moving’, and also when and where products should be supplied from.

Powar also stated he learned of the need for a VAT number through customers at the Cash and Carry where he worked, also using these customers as suppliers after he opened his shop.

Many of these suppliers were also linked with a criminal missing trader intra-community (MTIC) which lost HMRC £34.2m in VAT, leading to two criminal trials at Southwark Crown Court. Ten of the gang members were convicted in 2019, with four being acquitted.

These ‘convicted defendants, part of an organised crime group that established and controlled at least 19 purported UK alcohol buffer traders’, which ‘ran a paperwork factory manufacturing mainly paper transactions, the purpose of which was to clean smuggled alcoholic stock to make it look as though it had been purchased legitimately’.

Through this investigation, HMRC obtained spreadsheets with all the transactions of the criminals, including company names. Powar and the name of his company appeared in many of the spreadsheets for 179 transactions, although he could not explain why to the tribunal.

HMRC stated Powar should have done his due diligence to learn everything about the supplying companies before conducting any trade with them. Powar himself kept no records of his trades.

The tribunal cited the test in Kittel which ‘is simple and should not be over-refined’.  It embraces not only those who know of the connection but those who ‘should have known’. In such a situation the trader is an ‘accomplice’ and aids the perpetrators of the fraud.

Judge Brooks said: ‘We consider that Mr Powar, and therefore the company, not only should have known the transactions were connected to fraud but that it is more likely than not that Mr Powar actually knew of that connection.

‘It, therefore, follows that, at the time they were submitted to HMRC, the company’s VAT returns were inaccurate in that they contained a claim for a deduction of input tax to which it was not entitled, and Mr Powar knew that.’

The inaccuracies were deemed by the tribunal to be deliberate and as he was in control of the trading activities of the company all could be attributable to him. The reduced PLN of £74,823.63 was upheld due to this.