April's round up of the latest tax investigation news and cases:
Sarah Panitzke, 47, "Britain’s most wanted woman" has been arrested after nine years on the run for her part in a £1bn VAT fraud.
Originally from Barcelona, Panitzke was arrested in Spain whilst walking her dogs on the beach. She was detained in Santa Barbara, Tarragona by the Spanish Guardia Civil. She now remains in custody as proceedings begin in order to extradite her.
Panitzke was involved in a large criminal organisation specialising in high value fraud involving multiple companies. They bought mobile phones from VAT free European countries and then made sales of them in the UK for a large profit. After selling the phones, the companies avoided paying VAT to HMRC by disappearing and becoming untraceable. This is otherwise known as missing trader intra-community (MIC) fraud.
Panitzke was responsible for the company's accounts. She laundered money through different companies’ bank accounts and then would go to the different EU countries to pick up the cash she had transferred. She always made sure that the transactions were untraceable by using a generated IP address.
HMRC launched an investigation in 2005 after irregularities were noticed in the bank transactions to offshore accounts. This investigation led to a huge discovery of the gang members making arrangements to hide criminal profits. They accomplished this by laundering to accounts in the UK, Andorra, Dubai, Hong Kong, Switzerland, Portugal and the US.
Trials took place in 2012 and 2014 with a total of 18 gang members from England, Wales, Scotland and Spain totaling to 135 years in jail. The members of the gang claimed that their business was legitimate importing phones, however it was discovered that this was a sham as it also included non-existent phones.
Panitzke was ordered to pay over £2.4m for her involvement in the criminal activity or go to prison. She disappeared before the trial took place and was sentenced to eight years in prison. The gang was ordered to repay £111m in profits made from the fraud, hearing that they had sold more phones in the UK than all the legitimate phone shops together.
Confiscation orders were taken against 16 members totaling more than £114.9m. Assets worth £300,000 were also recovered.
Simon York, director, fraud investigation Service, HMRC, stated: "Sarah Panitzke was one of Britain’s most wanted tax fugitives. Panitzke thought she had put herself outside of the reach of HMRC, but through our work with UK law enforcement and international partners we have tracked down another tax fugitive. No tax criminal is beyond our reach."
Tom Dowdall, international deputy director, NCA comments: "Sarah Panitzke has been on the run for almost nine years. Given the length of time, she might have thought we had stopped searching, but she remained on our radar.
"Joint working between UK law enforcement and our partners in Spain led to her being apprehended, and we will now seek her extradition back to the UK to serve her prison sentence.
"This should serve as a warning to others on our most wanted list – we will not rest until you are captured, no matter how long it takes."
There has currently not been any further dates announced for court proceedings against Panitzke.
A trio appeared in court for submitting fraudulent VAT repayment claims totaling to £593,000.
Hugh Black, was sentenced at Liverpool Crown Court to five years in prison after pleading guilty to conspiracy to fraudulently evade VAT, two counts of fraud in anticipation of winding up and making false statements.
Secondly, Helen Black (Hugh Black’s wife) was sentenced to 14 months in prison, suspended for two years after pleading guilty to a total of two money laundering offences, acquiring and transferring criminal property. She was also given the order to repay £88,000 within three months or she would face a further nine month sentence in prison.
Thirdly, Desmond Fazackerley (friends with Black) was jailed for three years for pleading guilty to conspiracy to cheat the public revenue.
Over a time period of two years, Black had altered invoices from legitimate companies and tried to claim £593,000 from HMRC, however £284,000 was paid out. He transferred £350,000 out of his company ‘Ecogreen Renewables Ltd’ before it was wound up. This was to avoid paying any debt or creditors. He transferred the money to his and his wife’s company ‘Phoenix Interiors Ltd.’
When questioned about the money, Black lied and said that he moved the money because Ecogreen Renewables owed Phoenix a debt of twice this amount. The court heard that they were "enjoying a higher standard of living than they would otherwise have been able to afford" with money being spent on personal luxuries and holidays abroad.
Helen Black was also claimed to be "fully aware" of the false claims when she appeared in court.
Julie Barnes, chief investigator for the Insolvency Service, exclaimed: "Hugh Black knew that his company could not pay its debts and was about to enter insolvency, but this did not stop him fraudulently transferring thousands of pounds to his wife’s company.
"What’s worse, the cladding installer fabricated debts to kibosh the genuine claims of one of his creditors, worth hundreds of thousands of pounds, and his wife was fully aware of these deceitful activities.
"The courts have rightfully recognised Hugh and Helen Black’s dishonesty and their sentences should serve as a stark warning to other directors that you have a clear duty to pay your debts and refrain from concocting false documents."
Sandra Smith, assistant director, fraud investigation service, HMRC, continued: "The majority of individuals and businesses pay the tax that is due, but Hugh and Helen Black and Desmond Fazackerley are the exception. No crime is victimless. Their greed robbed our vital public services of much needed funds.
"HMRC is on the side of the law abiding majority. By tackling the most serious forms of tax crime we are creating a level playing field for businesses and citizens. We are determined that they shouldn’t be disadvantaged or impacted by the criminal actions of others."
Partner at law firm Pinsent Masons Steven Porter, said that HMRC has increased its efforts as pandemic leniency has ended.
The total revenue from HMRC tax investigations and other compliance activity has risen to £30.8bn in 2021, compared to £28bn in 2020 as it looks into tax evasion or avoidance during the pandemic.
Some investigations were paused in 2020 in order to take on the extra administration from the furlough scheme, and to allow taxpayers a little more time during the pandemic. With the furlough having come to an end, HMRC are ramping up investigations into compliance activity and tax errors and avoidance in the past year.
HMRC has collected £5.8bn in cash from tax investigations in the last year and has prevented a further loss in revenue of £11.2bn.
One of the larger areas of focus was on tax underpaid by bigger businesses. Investigations took place into 2,000 of the biggest businesses and brought in £8.6bn in the year to 31 March 2021. This accounted for 28% of all HMRC’s investigations last year. It is also beloved that £35.8bn of tax may have been underpaid over the same time period by big businesses.
The firm found that HMRC’s Large Business Directorate, the team responsible for investigating the tax affairs of the UK’s biggest and most complex businesses, had a staff bill of ‘just’ £125m, generating a 6,800 per cent return on investment on the £8.6bn it brought in.
Steven Porter, partner at Pinsent Masons said; “In the past year HMRC has ramped up its activity even further as the lenience it showed during the pandemic comes to an end.”
“HMRC undertakes a huge programme of compliance activity every year. This ranges from property raids to social media monitoring to closing tax loopholes,” Porter said.
“This goes for large corporates as well as smaller businesses and individuals. HMRC’s stance on corporates underpaying tax has hardened significantly in recent years and is only likely to get tougher as it uses international data, big data and artificial intelligence to help it pursue unpaid tax,” Porter continued.
“HMRC has been investing in its compliance work significantly and is generating great returns as a result. This should act as a reminder to individuals and businesses that HMRC will not let up on its pursuit of recovering unpaid tax.”
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