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A 51 year old woman from Bristol has been jailed for more than five years for fraudulently obtaining repayments of VAT in excess of £4 million.

During a trial that laster twelve weeks, the court heard how, during the period from 1999 to 2002, the woman had manipulated the business affairs of her group of companies, the Peakviewing Transatlantic Group, to obtain repayments of VAT to which she was not entitled which she then used to prop up the finances of her business.

Companies registered for VAT in England and Wales obtained the VAT repayments before HM Customs and Excise withheld a further £18 million whilst they pursued their investigation. There was also a loss to Customs and Excise in the Isle of Man which totalled £16.4mn, this was repaid to companies within the group which were registered within the Isle of Man jurisdiction.

The scheme employed in this case involved the production of invoices and credit notes at times to coincide with the returns that the individual companies had to make to Customs and Excise in respect of VAT.

It involved making use of a total of seven companies in England and three in the Isle of Man, all part of the Peakviewing Group, in order to create a circularity in sales and purchases in such a way as to allow the Group overall to benefit from repayments of VAT.

The Peakviewing Group companies, including the Isle of Man companies, were run from offices in Stonehouse, Gloucestershire. The Group purported to be involved in film production costing over £275,000,000 between 1999 and 2002. Over £200,000,000 of that amount related to a series of five minute films under the "Viewing 4 Leisure" banner. The actual costs and value of those films was less than 10% of that figure. That was because the costs they claimed to have incurred were never in reality incurred in anything like the amount that they claimed. Viewing 4 Leisure was destined to be used on the Internet or on terrestrial television and was designed to advertise leisure activities in many countries throughout the world. At the time they were made the technology was not sufficiently advanced to allow the programmes to be shown. The vast costs involved in developing the product were to be funded by:

(a) Sale and leaseback deals. These were tax advantageous schemes designed to attract finance for the British film industry and which allowed the film producer to obtain approximately 10% of the costs in cash once the film was made, so long as the film had been certified as a British film by the Department of Culture Media and Sport. By submitting costs for the films ten times the true value she was able to recover almost all the costs of making the film without having to make any actual sales of the film product.

In 2004 the Department of Culture Media and Sport was successful in persuading the High Court to refuse certificates for these films. This led to the collapse of income tax schemes designed to take advantage of these inflated costs.

(b) In order to provide evidence that the Viewing 4 Leisure series was worth the costs submitted to the DCMS, inflated invoices were passed between the companies within the Group. Taking advantage of the fact that the Group companies were required to make VAT returns at the end of different months throughout the year, the invoices between the companies within the group were manipulated so as to ensure that each company in turn had higher purchases than sales, thereby causing Customs to repay the Group companies substantial amounts of money.

Over the period the amount reclaimed by the group companies from Customs here and in the Isle of Man amounted to £39,000,000. In addition, a large number of credit notes were used to assist in obtaining the steady stream of repayments from Customs.

Link

HMRC: Film "Producer" tax cheat jailed for 5-1/2 years