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 0870 600 829 if you are in any doubt about your responsibilities.  Maximum call charge from a BT landline is 6p plus up to 6p per minute.  Business rates and calls from other networks may vary.