Thirteen is certainly unlucky for Jason Tsai, one-time owner of distie Changtel Solutions UK – formerly ENTA Technologies (ETL) – as that's the number of years he's been barred from being a company director.
The “disqualification” was due to Tsai’s participation in a VAT carousel – also commonly known as missing trader intra-community (MTIC) fraud – that left Changtel owing millions of pounds to HMRC, the Insolvency Service (IS) stated.
“Between 29 June 2007 and 10 December 2010… Tsai caused or allowed Changtel Solutions UK to participate in transactions which were connected with the fraudulent evasion of VAT, such connections being something that Mr Tsai either knew or should have known about," the document stated.
In MTIC fraud, batches of products - usually chips or other relatively small, high value components - are shipped between companies in different parts of the EU. The fraudsters charge VAT on the sale of the goods but do not pay this back to the relevant governments and then in most cases disappear or shut up shop.
As far back as 2006, the tax collector started to warn ETL and Tsai that tax losses had been identified in its “transaction chains” and disputed the input tax the company claimed in its VAT returns, the IS document stated.
Further, it claimed ETL had conducted a small number of wholesale exports each month, sourcing goods, purchasing and selling them on “within a very short space time - usually the same day”. The inventory was not held in stock.
In one example listed by IS, a supplier was given a monthly credit guide of £1,800, and in the three and a half-year period, ETL purchased 1.3 million USB flash drives with a total value of £112m from that supplier.
Outside of the profit made by ETL on certain transactions that indicated MTIC fraud, HMRC also noted the firm had overseas based internet banking facilities, as did other businesses in the sales chain.
“Despite being aware of VAT fraud in ETL’s trade sector and engaging in transactions bearing the features of such fraud, Mr Tsai failed to ensure that ETL carried out effective steps, check and/or due diligence in respect of its four trading partners involved in the wholesale export transactions.”
Between 2007 and the close of 2010, ETL was involved in 107 wholesale transactions, 79 of which HMRC claimed were traced back to “defaulting traders”, incurring tax losses of at least £15.6m. A further 25 were tracked to defaulting suppliers, via a contra trader, and those defaulting traders incurred tax losses of £5.4m to HMRC.
“Tsai caused or allowed ETL to wrongfully claim input VAT of at least £19.5m from HM Revenue and Customs in relation to the [fiscal] 2007 to [fiscal] 2010 VAT periods,” the IS document stated.
The tax collector finally wound up Changtel in 2015, prior to this, Changtel sold several assets to Entatech in 2013, another company with links to Tsai. These transactions were disputed by HMRC.
Entatech itself was sold to Stevinson Capital in 2015, which inherited the spat with HMRC and reached a settlement early last year. Tsai has no involvement with the business. ®