Tax Update (July 2008)
Aircraft Engine VAT Fraud
A recent case involving the fraudulent reclaiming of VAT on
a scam jet engine deal shows the investigatory powers of HM Revenue
& Customs (HMRC)
John Wilmot, a barrister specialising in shipping, aviation
insurance and international tax law had arranged a deal with an
Iraqi national, Mr Al Majari of Basra, and had sourced a supplier
after visiting the Excel trade fair in London. The deal was for the
purchase of jet engines from a UK company, Aircraft Unit
Engineering Ltd, and sale to an Iraqi businessman. The engines were
shipped on the Heroi Stakhorskyi out of Southampton in December
2006 to Umm Quasr, Iraq.
Based on this deal Mr Wilmot made a VAT reclaim for the VAT
charged by the UK supplier and was able to provide documentation
for the sale and shipping. The value of the engines was said to be
£100m with VAT of £17.5m.
What he did not take account of are the investigatory powers of
HM Revenue & Customs (HMRC) who naturally commenced an
investigation into such a large <.reclaim. Whilst able to
provide paperwork for the sale and shipping he was unable to
produce bank accounts showing the movement of monies in respect of
the deal. Furthermore, HMRC discovered that the VAT number used on
the invoice was a redundant number previously used by Argos
Catalogue and that whilst the supplier does exist they do not deal
in aircraft engines, had never heard of Mr Wilmot and never
exhibited at Excel. The true value of the engines was less than
£20m.
HMRC conducted a search of Mr Wilmot's office and found a laptop
computer which they forensically examined. This showed that all the
documentation relating to the deal including invoicing had been
created on that laptop and had not been scanned in as suggested by
Mr Wilmot. In addition the ships manifest of the Heroi Stakhorskyi
showed that they had not shipped any aircraft engines nor had they
docked at Umm Quasr.
Not surprisingly Mr Wilmot, a Nigerian national, was found
guilty of attempted VAT fraud and was sentenced to 5 years
imprisonment. He was also recommended for deportation on completion
of his prison sentence and disqualified as a company director for 8
years.
Stay on the right side of the law and out of court with
expert advice from Mentor Tax. Call us on 0800 634 7000 if you are
in any doubt about your responsibilities.