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HMRC Victorious In Construction Industry Tax Fraud Case

by Jason Gorringe, Tax-News.com, London

01 February 2007


Three members of a team of construction industry fraudsters were jailed for a total of 11 years at Blackfriars Crown Court on Monday, for their part in a fraud with an estimated tax loss of GBP4.6million.

Brian Kavanagh, his wife Margaret, and Thomas O'Connor, all from Mitcham in Surrey, had been found guilty in October 2006 after a six week trial.

The court heard how B Kavanagh Construction Ltd, a company run by Brian Kavanagh and his wife Margaret, submitted CIS24 vouchers from a number of subcontractors amounting to over GBP5.3 million in October 1999. These vouchers had come under the control of a third party who then offered the Kavanaghs a full banking service of supplying invoices, vouchers and bank accounts to launder money to enable the contractors to pay their workforce in cash and conceal their responsibility for Income Tax and VAT payments.

On 24 September 2002, their property was searched. The paperwork seized showed that certain payments that had allegedly been made by the Kavanaghs to subcontractors, actually represented cash in hand payments to their workforce. The true nature of these payments had been concealed in the accounting records of the company by the use of false documentation provided in the name of labour supply subcontractors, namely invoices and CIS24 vouchers.

Payments made to the banks of the subcontractors in question were returned in cash (less a commission) to the pair to pay the company's workforce outside of the taxation net. In the period from October 1999 to September 2004 they had continued with the fraud by utilising the CIS24 vouchers of another subcontractor, Thomas O'Connor, to the tune of GBP3.4 million.

Thomas O'Connor was the director of O'Connor Construction UK Ltd. O'Connor had also submitted CIS24 vouchers from subcontractors totalling GBP4.25 million. O'Connor was involved in buying misused subcontractor vouchers and was involved in a money laundering fraud to facilitate an off record workforce.

HM Revenue & Customs Deputy Head of Region Andy Stewart announced that:

"This is an excellent outcome in a trial which is one of a series of long and painstaking investigations into subcontractor fraud in the construction industry. Together, these three defendants cheated the Government out of nearly GBP5 million in Income Tax and VAT. This created an unfair competitive advantage for themselves over those who conduct their business in an honest fashion. They filled their own pockets in the process with money stolen from the public purse. The construction industry will continue to be a high priority in HMRC's fight to tackle tax fraud."

Brian Kavanagh was this week sentenced to 5 years in prison, Margaret Kavanagh to 18 months, and Thomas O'Connor to 4 1/2 years.


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