HMRC: Two businessmen who lied about cash they had hidden in offshore bank accounts have been jailed for tax evasion and fraud

Roderick Smith (44) of Wigan told HM Revenue and Customs (HMRC) that he had one offshore account when he was given the chance to come clean in an offshore disclosure campaign. He failed to mention 11 other accounts. His business partner, Stephen Howarth, (44), from Hyde, Cheshire, also failed to take the chance to disclose any of his accounts in the campaign.

The two men ran a company offering computer technology expertise to the car trade, with many customers based in Germany. But the pair did not registered their true level of sales with HMRC and instead put their profits in bank accounts in the Isle of Man. Alerted by the German tax authorities, HMRC investigators discovered that, over a six-year period, the men evaded around £500,000 in UK income tax.

Mike Preston, HMRC Assistant Director, Criminal Investigation, said:

“Smith and Howarth stole from UK taxpayers, using the money that should have paid for public services to fund luxury lifestyles filled with prestige cars and expensive holidays. 

“By failing to declare the true level of sales in Europe, and pay tax due on these earnings, they must now face the consequences of their actions in jail. HMRC is clamping down on tax evasion and targeting UK taxpayers using offshore accounts to disguise their wealth. I urge anyone with information about suspected tax fraud to call the HMRC Tax Evasion Hotline on 0800 788 887.”

HMRC investigators identified sales totalling £1,255,615 in Germany, while the company the pair ran in Manchester, Goldlogic Control Systems Ltd, declared only £49,650 of this money in sales for the same period. The balance was siphoned off into the offshore accounts of five shell companies registered in Mauritius and the Isle of Man, created by the directors solely for the purpose of tax fraud. 

Both men had the opportunity to disclose their offshore accounts through HMRC’s Offshore Disclosure Facility (ODF) in 2007. Howarth did not register for the ODF, while Smith did register but then disclosed only one of the 12 accounts he controlled overseas. Smith’s actions were compounded by also lying to his accountant. 

His Honour Judge Warnock said in court today of both men: “You cheated the Revenue, and therefore this country, by evasion of income tax. The authors of your references will be shocked and disappointed at what, in effect, were crimes motivated by greed and selfishness. Only sentences of imprisonment are appropriate in respect of the offences you have committed. To suspend these sentences would offend any reasonable sense of justice on the part of the honest taxpayer.”

Smith was jailed for 15 months and Howarth for 12 months. Confiscation orders were issued under Proceeds of Crime legislation in respect of Smith for £300,000 and Howarth for £200,000. They must pay within 24 months or they will be jailed for a further 15 and 12 months respectively. Both men must pay £5,000 court costs. Smith has already paid £40,000 under the ODF scheme.

Notes

1. Roderick Iain Smith (DOB 15/12/68) of Duddon Close, Standish, Wigan, was charged with four counts of fraud: three counts related to Cheating the Public Revenue contrary to Common Law and one count of fraud by false representation, contrary to Sections 1 and 2 of the Fraud Act 2006. Smith pleaded guilty to one count of Cheating the Public Revenue to the false representation count. He was sentenced to 15 months’ jail for the cheating charge and three months for the false representation (to run concurrently) at Liverpool Crown Court. The false representation count relates to Smith’s participation in the HMRC Offshore Disclosure Facility. Smith failed to make a full disclosure in an attempt to disguise his criminal activities, listing only one bank account in the Isle of Man when he had several others. He knew that HMRC was aware of the account he had declared. 

2. Stephen John Howarth (DOB 02/05/68) of Orchard Rise, Gee Cross, Hyde, Cheshire, was charged with two counts of cheating the Public Revenue contrary to Common Law. Howarth pleaded guilty to one of the counts and was sentenced to 12 months’ jail at Liverpool Crown Court.

3. Some £547 million has been raised by HMRC from voluntary disclosures, and almost £140 million from follow-up activity, including 20,000 completed investigations. HMRC campaigns launched so far have targeted offshore investments, medical professionals, plumbers, VAT defaulters, coaches and tutors, electricians, online traders and higher rate taxpayers with outstanding tax returns. There are also 13 criminal investigations underway, with five convictions already secured.

4. This is the first prosecution involving the ODF in the UK. HMRC continues to investigate the often-complex tax affairs of thousands of individuals who chose not to take the opportunity to voluntarily come forward and declare offshore assets and accounts during the ODF and the subsequent New Disclosure Opportunity (NDO) in 2009. Over 18,500 investigations related to these two campaigns have already been completed

5. Campaigns are not amnesties; people have to pay all the tax, interest and penalties due and HMRC will check that disclosures made are complete, as well as chasing those who do not come forward.