Fraudsters invoice £7m in fake invoices to feed lavish lifestyle. How did they get away with it?

Three people were convicted of defrauding the taxpayer for over £1 million in a criminal scheme that exploited government systems designed to support businesses, the Crown Prosecution Service (CPS) has reported. The people involved spent taxpayer money on luxury cars, jewellery, £1,500 on Lego, home improvements, investments in other companies, loans, and gifts to family.

The news comes at a time when freelancers and small business owners are having to cough up more taxes in 2022 in the midst of a Cost of Living crisis. Thousands of legitimate limited company directors, who were denied COVID government COVID support, will find the news especially disheartening.

• Lee Hickinbottom was found guilty of multiple counts of cheating the public revenue (HMRC and DWP)
• Tabatha Knott was found guilty of one count of cheating the public revenue (HMRC) and one count of money-laundering.
• David Hickinbottom (DOB: 28 May 1985) pleaded guilty of one count of cheating the public revenue.  

Who was found guilty?

Lee Hickinbottom, 49, was found guilty of multiple counts of cheating the public revenue (HMRC and DWP). Tabatha Knott, 34, was found guilty of one count of cheating the public revenue (HMRC) and one count of money-laundering. David Hickinbottom, 36, pleaded guilty of one count of cheating the public revenue.

How did they get away with it?

The criminal enterprise involved the defendants using a company’s VAT registration to make fraudulent VAT repayment claims towards the end of its life and after it had gone into liquidation. Businesses who have charged customers prices less VAT than they have paid on purchases can then put claims to the HMRC to repay the difference.

Between September 2013 and November 2014, Serenity Travel Ltd over claimed £43,177 in VAT repayments. Tabatha was the director of this company but was assisted by Lee Hickinbottom.

Once Serenity Travel had gone into liquidation, Lee Hickinbottom VAT registered a company called Serenity Community Transport Ltd, with him named as a director. There is no evidence that this company ever did any legitimate trade, but Lee Hickinbottom used false invoices to support his fraudulent VAT returns. The legitimate companies with whom he purported to have traded were clear they had not traded with Lee Hickinbottom in any capacity. Serenity Community Transport Ltd claimed £1,290,326.93 in VAT (relating to over £7m in fake invoicing).

What was taxpayer money spent on?

Money from the fraud was used to buy a café and newsagents in Solihull. Rebranded as “Cornyx Corner”, the businesses quickly failed in the hands of Lee Hickinbottom. Once HMRC had intervened and stopped VAT repayment claims being paid to Serenity Community Transport Ltd, Lee Hickinbottom continued to make false VAT repayment claims of over £50,000 to keep the new businesses afloat. 

Taxpayers’ money was spent on Lee Hickinbottom and Knott’s lifestyles: cars, jewellery, £1,500 on Lego, home improvements, investments in other companies, loans, and gifts to family. Although Knott had no formal links to Serenity Community Transport, she benefitted from money being transferred to her from these frauds and the lifestyle Lee Hickinbottom provided for her.

Before the trial, Lee Hickinbottom admitted to cheating the revenue with regards to false claims for Job Seekers’ Allowance and Employment Support Allowance by failing to declare savings and income during the time the companies were operating. He received £28,520.26 which he was not entitled to receive.

David Hickinbottom had two companies, neither were registered for VAT but he charged his customers VAT totalling £8,322 which he was not entitled to do. He pleaded guilty to this offence of fraud before the trial.

Taxpayers’ money, which should have been spent on vital public services such as the NHS, education and social care was instead used to fund the unearned and extravagant lifestyle these defendants enjoyed.

Anamarie Coomansingh of the CPS

What is the CPS doing about it?

“The CPS will be inviting the court to put in place measures to prevent Lee Hickinbottom, a career criminal, from committing similar offences in the future. We will also be pursuing confiscation proceedings against the defendants, to strip them of any money from their criminal activity,” said Coomansingh.

Nick Stone, Assistant Director, Fraud Investigation Service, HMRC, said: “Lee Hickinbottom and his former partner used stolen taxpayers’ cash to fund a lavish lifestyle that included hot tubs, holidays and home improvements they could not legitimately afford.

“The majority of businesses and individuals pay the tax that is due, but we will relentlessly pursue the determined minority who refuse to play by the rules. 

“Tax fraud is not a victimless crime, it robs our vital public services of much-needed funds. We encourage anyone with information about VAT fraud or money laundering to report it online or to call the Fraud Hotline on 0800 788 887.”