UK Tax Fraudster Ordered To Pay Back GBP16.25 Million

by Robert Lee, Tax-News.com, London

20 September 2007

London's Southwark Crown Court on Wednesday issued one of the largest ever confiscation rulings in relation to a tax fraud case, when it ordered former chartered accountant Ian Leaf to pay GBP16.25 million (US$32.6 million).

HM Revenue and Customs announced on September 19 that the confiscation hearing concluded an eight year investigation by HMRC prosecutors which resulted in a 10 year jail sentence for Leaf.

Leaf, who moved from the UK to Switzerland in 1987, is accused of buying up thirteen UK subsidiary companies and using an array of complex financial arrangements to evade GBP54 million in taxes.

Leaf was found guilty of 13 counts of fraudulent trading, contrary to section 458 of the Companies Act 1985: one count for each of the 13 companies acquired using this particular scheme. The offence of fraudulent trading requires the prosecution to prove that the defendant was knowingly carrying on a business for fraudulent purposes.

According to HMRC, when purchased by Leaf, as well as outstanding tax liabilities from past profits, the companies held enough cash to pay the tax owed. Rather than using the money to pay the tax, Leaf created fictitious documents from a bank registered in the Pacific island of Nauru which was controlled by him, and appeared to show that the companies had borrowed huge sums of money. The resulting fabricated interest payments were offset against tax. It was also falsely claimed that these loans were used to undertake massively profitable foreign exchange deals which were not subject to UK tax, out of which were paid dividends. Leaf then falsely used these to reclaim corporation tax rightly paid by the companies before he purchased them.

Welcoming the order, Robert Alder, HMRC, Head of Restraint and Confiscation commented: "Our colleagues in the Revenue & Customs Prosecution Office (RCPO) will whenever appropriate pursue confiscation orders against those like Mr. Leaf who attempt to line their pockets by depriving the country's essential services of vital resources. Confiscation orders ensure that such criminals are deprived of the financial advantages they seek to gain over the vast majority of honest people."

However, the order handed down by Judge David Higgins is not yet formal, and will not be made so until receivers get to grips with a complex network of family trusts, in which Leaf says most of the remaining proceeds from the fraud are concealed.

Nonetheless, Leaf faces an additional ten years behind bars if he fails to comply with the Judge's order.

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