Now that’s what I call a lot of money! A former Glasgow mobile phone dealer has recently been banned from being a company director for 12 years after a vast VAT scam that nicked more than £48 million owed to the tax man.
12 year Directorship ban
Gian Hayer, aged 42, is the lucky owner of one of the longest bans ever applied by the Insolvency Service. They found that his company had wrongfully reclaimed more than £858,000 in VAT before he stopped trading in 2007. But he was just one part in a chain of traders who used a loophole specific to the mobile phone sector, where VAT rates on mobile phones differ between the UK and other countries.
Offsetting VAT in a very dodgy way
One trader would buy phones from somewhere like Cyprus, where there is no VAT on mobiles. They’d be sold on to dealers in Britain, one of whom would ‘disappear’ and deprive HMRC of the VAT owed. Then the products were re-sold in countries with zero VAT on mobiles and the seller would claim back the VAT on their original purchase. The traders involved would also buy and sell similar numbers of mobiles at more or less the same time, offsetting the VAT from one transaction with the VAT due on another, AKA contra-trading.
It’s payback time…
Three huge deals in spring 2006 saw Hayer buying more than a million phones valued at £455m and selling them for £456m. He was forced to pay back more than £450,000 to HMRC in 2010, but wasn’t charged with fraud until 2013 despite having received three warnings from HMRC between 2002 and 2005 and ignoring their advice about putting things right.
Will there be criminal charges?
HMRC won’t comment, but one would assume the perpetrator would be banged up for a fraud of such spectacular proportions. Is a 12 year directorship ban really enough punishment for a fraud that’s been going on for so long, and so openly, despite multiple HMRC warnings?