Five years for 'record' VAT fraud

Young was sentenced at the High Court in Edinburgh

A businessman has been jailed for five years for what has been described as "the largest sustained attack on the VAT system ever taken before the courts".

Kenneth Young, from East Kilbride, set up hundreds of bogus companies to defraud the Inland Revenue.

His trial at the High Court in Edinburgh heard that the 43-year-old made a profit of more than £500,000 by manipulating the VAT cash accounting system, which allows companies to reclaim tax paid on imported goods.

Many of these companies which were thrown a lifeline still went to the wall and people lost their jobs

Gordon Miller
Customs and Excise

"An enormous sum of money has been lost to the Treasury," said trial judge Lord McEwan.

"The figure given was £2.4m, of which £2m is not recoverable."

He made a confiscation order for assets worth £26,000, which Young has six months to pay.

He was also disqualified from being a company director for seven years.

The court was told that Young had set up an elaborate smokescreen of seemingly reputable companies in order to defraud the Inland Revenue.

Luxury cars

The complex scheme also involved offering interest-free cash loans to firms with business problems.

He told his clients that their money would be repaid to Customs and Excise, but in reality he spent it on luxury cars and holidays.

Lord McEwan told Young that he had condemned companies which became involved in his scheme to "liquidation, bankruptcy and financial hardship".

Young changed his plea during the trial

Gordon Miller, a senior investigating officer with Customs and Excise, said Young had claimed to operate more than 700 companies from above a chemist's shop in Rutherglen, Glasgow.

His non-existent "businesses" had a combined turnover of £252m.

Young was initially charged with cheating the system of more than £10m.

However, four weeks into his trial he changed his plea and admitted defrauding Customs and Excise of £2.44m and obtaining £224,000 from customers by fraud.

Mr Miller said: "It was the largest sustained attack on the VAT system ever taken before the courts.

"It was a sophisticated fraud because on paper there was nothing wrong happening.

Struggling firms

"Those who operated the fraud did so very professionally with a glossy image, Harley Street addresses and advertisements in the best newspapers."

He said that many of the companies conned by Young were struggling firms.

"Many of these companies which were thrown a lifeline still went to the wall and people lost their jobs," he said.

Young's plan was based on a scheme devised by Ian Simpson, 52, of Hailsham, East Sussex, who was jailed at Maidstone Crown Court last May.

Herbert Kerrigan QC, defending, said Young was "naive" and had been "bowled over" by Simpson's tales of buying a £1m house through the scheme.