Nadhan Singh Potiwal, the director of Red 12 Trading Limited (Red 12) in Bristol has been disqualified from being a director for 13 years from 5 March 2013, for causing the company to participate in transactions linked to VAT fraud and to wrongfully claim VAT of over 2.6m.
Mr Potiwal was disqualified following court proceedings brought by the Insolvency Service at the High Court in Manchester.
The disqualification came after Mr Potiwal, 34, dropped his defence against the court case and gave an undertaking to the Secretary of State for Business, Innovation and Skills (BIS) not to promote, manage, or be a director of a limited company until 2026.
Mr Potiwal did not dispute that Red 12, which traded in mobile telephones, wrongfully claimed of 2,672,748 of VAT to which it was not entitled. Such claims arise when a UK based company pays VAT on its purchases (input tax) but sells the goods abroad where the sales are not subject to VAT (output tax).
In giving the undertaking Mr Potiwal also did not dispute that, Red 12 entered into transactions involving the purchase and sale of millions of pounds worth of mobile telephones that he either knew, or should have known, were connected to the fraudulent evasion of VAT: a fraud commonly known as Missing Trader Intra-Community (MTIC) VAT fraud or Carousel fraud.
HMRC identified that the chains of transactions in which Red 12 participated between 1 February 2006 and 31 March 2006 traced back to defaulting traders (i.e. companies that did not pay over the VAT due to HMRC).
The company was wound-up by the Court on 19 March 2010 owing 1,667,517 to HM Revenue and Customs (HMRC).
Commenting on the disqualification, Ken Beasley, Official Receiver at the Insolvency Services Public Interest Unit, said:
VAT fraud is a serious attack on the public finances. The Official Receiver has a statutory duty to investigate the affairs of insolvent companies and will bring disqualification proceedings against directors of companies found to have been involved in such activities.
The Insolvency Service has strong enforcement powers and will not hesitate to use them to disqualify directors whose companies defraud the public purse.