Two Hampshire businessmen who ran pizza franchises in the south of England have been jailed for a £600,000 VAT fraud.
Mukesh Patel, 55, and Harishchandra Desai, 61, were franchisees of Pizza Hut UK Ltd and operated four takeaway restaurant outlets in Southampton, Poole and Bournemouth. The men traded as Pizza Delivery Services Ltd from October 2002 to September 2011.
HM Revenue and Customs (HMRC) investigators discovered that, although the company was registered for VAT, the men only declared takings from three of their four outlets. Figures for the Poole restaurant were not included on VAT returns.
HMRC criminal investigators worked closely with Pizza Hut UK Ltd to analyse sales data, and records revealed that Pizza Delivery Services Ltd suppressed the turnover figures from 1 July 2007 to 30 June 2010. There were differences between data supplied by the men to HMRC and that supplied to Pizza Hut UK Ltd, resulting in a VAT shortfall of almost £200,000. The pair failed to supply VAT returns for any of the restaurants from July 2010 to September 2011, resulting in a further VAT debt of over £400,000.
John Cooper, HMRC’s Assistant Director of Criminal Investigation, said:
“Desai and Patel ran four lucrative pizza franchises, but greed and a desire to fund their comfortable lifestyles and other business ventures led them to commit calculated VAT fraud over a number of years. We would like to thank Pizza Hut for their assistance and co-operation in bringing these men to justice.
“Our message to criminals is clear - it is simply not acceptable to steal from the tax system and, ultimately, every honest person in the UK. Anyone with information about VAT fraud should contact the Customs Hotline on 0800 59 5000.”
An earlier civil investigation by HMRC into Pizza Delivery Services Ltd found the men had submitted nine false VAT purchase invoices to HMRC between April 2005 and July 2007 to reduce the amount of VAT due.
The men pleaded guilty at Southampton Crown Court on 8 October 2013 to cheating the public revenue of £598,415 in VAT. They were sentenced at Southampton Crown Court on 20 December 2013.
Both men were sentenced to 18 months in jail, and will serve half in custody.
Upon sentencing, Miss Recorder Maria Lamb said:
“You knew your duty to make VAT returns and to account for the VAT collected. You also knew it was likely, due to possible insolvency, that you would not be able to pay. That conduct was dishonest.
“This was not a particularly sophisticated fraud, nor was it fraudulent from the outset, but it was fraud nonetheless.”
The men both used the proceeds of their crimes to enhance their lifestyles and business interests. Both men own Mercedes motor vehicles.Desai spent a great deal of money on the interior design of his home near the New Forest.
Confiscation proceedings and a review of the men holding company directorships will follow.
Notes for editors
1. Mukesh Gordhanbaki Patel, DOB 26.05.58 of Bassett Green Road, Southampton, Hampshire. Former franchisee and former director of Pizza Delivery Services Ltd. He was jailed for 18 months at Southampton Crown Court on 20 December 2013.
2. Harishchandra Desai, DOB 10.03.52 of Exbury Road, Blackfield, Southampton. Former franchisee and former director of Pizza Delivery Services Ltd. He was jailed for 18 months at Southampton Crown Court on 20 December 2013.
3. The total amount of VAT evaded is £598,415. This includes £197,629 VAT evaded by Pizza Delivery Services Ltd through suppressed turnover figures, and £400,786 evaded by Pizza Delivery Services Ltd through non-submission of VAT returns of £400,786.00.
For sentencing purposes a figure of £553,982 was agreed.
4. The four Pizza Hut franchises operated by the men at the time of fraud were:
· 8 Shirley High Street , Southampton, Hampshire;
· 439 Bitterne Road, Bitterne, Southampton, Hampshire;
· 307 Wimborne Road, Winton, Bournemouth, Dorset; and
· 376 Ashley Road, Parkstone, Poole, Dorset.
5. Pizza Delivery Services Ltd folded through insolvency, leaving debts to HMRC.
6. The defendants were arrested in June 2012. They were charged in October that year with cheating the public revenue in relation to VAT, contrary to common law, while operating as Pizza Delivery Services Ltd between 1July 2007 and 30 September 2011, and under-declaring their true turnover figures resulting in an under-declaration of VAT which they knowingly failed to declare or pay.
7. Pizza Hut UK Ltd was not subject to this criminal investigation or court proceedings. The company was simply franchisor of the pizza outlets operated by Desai and Patel.
8. Pizza Hut UK Ltd is now registered as YUM! III (UK) Ltd.
9. Photos are available on HMRC’s flickr channel www.flickr.com/hmrcgovuk and from the “press and media” pages at https://www.gov.uk/government/organisations/hm-revenue-customs
10. Follow HMRC on Twitter @HMRCgovuk
Issued by HM Revenue & Customs Press Office
HM Revenue & Customs (HMRC) is the UK’s tax authority.
HMRC is responsible for making sure that the money is available to fund the UK’s public services and for helping families and individuals with targeted financial support.