Seven individuals connected to payroll firms and a construction company have been imprisoned for orchestrating a sophisticated £22 million tax fraud scheme.

Daniel Newton, Philip Bailey, Sean Dean, Lee Hudson (no relation), Sarah Gillard, Bradley Mortimer, and Kevin Ratcliffe were sentenced at Southwark Crown Court for cheating the public revenue, money laundering-related offences, acquiring criminal property and organised criminal gang activities.

The individuals were involved in setting up commercial contractor payroll firms that would pay individual construction operatives for construction companies. The payroll firms would charge customers gross plus VAT and then pay the individuals net of CIS deductions. The VAT collected from the clients, and CIS deducted from the individuals – amounting to 40 per cent of anything paid – was supposed to be paid to HMRC. However, instead, the unpaid contributions were diverted to the bank accounts of the defendants, who were beneficiaries of these fraudulent actions.

Most of those convicted actually ran the payroll fraud, but a client who ran a construction firm also went down because he was aware of the fraud and profited from it.

Ian Hackett, operational lead at HMRC’s Fraud Investigation Service, said: “We have worked closely with Kent Police to dismantle this sophisticated and complex fraud. The tenacity and expertise of the investigators involved in this joint investigation has protected millions of pounds of taxpayers’ money, which is needed to fund our public services. 

“We encourage anyone with information about any type of tax fraud to report it to HMRC.”

Managing director Ian Anfield said: “This isn't the first time we've seen the owners of construction firms hauled off to jail alongside the dodgy payroll companies they used – and it won't be the last. HMRC has new legal powers and extra resources so time is running out for fraudsters and those who profit from using them.

“Any CIS payroll firm or so-called 'commercial contractor' that offers cash backs, volume rebates, free credit, free insurance or fees that seem too good to be true should be given a wide berth. 

“It is easy to see why firms are attracted, especially when the use of commercial contractors is so prolific, but ignorance is no defence. Those who have fallen into the trap need to get out – while they still can.”