Case details for SARAH KATIE MARIA BARTLETT

Name: SARAH KATIE MARIA BARTLETT

Name: Bartletts HI-FI Ltd

Date of Birth: 17 / 11 / 1972

Date Order Starts: 25 / 5 / 2022

Disqualification Length: 12 Years 0 Month(s)

CRO Number: 06832520

Last Known Address: 42 The Pines,, , , , WOODFORD GREEN,, IG8 0RW

Conduct: 1. Sarah Katie Maria Bartlett (“Mrs Bartlett”) caused or allowed Bartletts Hi-Fi to participate in transactions which were connected with the fraudulent evasion of Value Added Tax (“VAT”) from period 09/15 onwards, such connection being something with which she either knew or should have known about. 2. She also caused or allowed Bartletts Hi-Fi to make wrongful claims for VAT for the periods 03/16, 06/16, 09/16, 12/16, 03/17, 06/17, 09/17 and 12/17 totalling £2,646,905. Annex for allegation 1: a) She was aware that the risk of Missing Trader Intra-Community (“MTIC”) VAT fraud was rife in the wholesale trade of electronic goods or ought to have been aware thereof because HMRC Officers had visited and educated her on the dangers: i) Prior to commencement of wholesale trading in electronics goods, HMRC Officers spoke with her co-director on 06/02/15 and established that he was operating the newly established wholesale side of the business. Her co-director showed a good basic understanding of Know Your Customer (KYC) checks and was warned that electronics goods were high risk items and due diligence measures were discussed with him. Officers then visited Bartletts Hi-Fi’s premises on 11/02/15 and met her co-director and discussed that KYC should not be a tick box exercise, warned about VAT hijacking, how to spot missing trader fraud and issued a copy of their PN726 information notice which gives detailed information on due diligence measures that companies can take to establish the integrity of supply chains. ii) On 13/02/15 HMRC emailed her co-director reiterating that fraud warnings and due diligence were discussed at the meeting on 11/02/15 and that it would be useful to read HMRC’s publications How To Spot Missing Trader Fraud and PN726. iii) On 07/07/15 HMRC wrote to Bartletts Hi-Fi and the company’s accountants by email arranging a meeting at the company’s premises on 10/07/15 adding a link to their publication How To Spot Missing Trader Fraud. iv) On 14/07/15 HMRC sent an education and warning letter to Bartletts Hi-Fi with advice on risks associated with MTIC fraud and procedures for validating VAT registration details of trading partners with HMRC’s office at Bootle. The letter further warned about the use of Alternative Banking Platforms and Money Service Businesses which were used to avoid regulation and scrutiny by the UK’s authorities and Bartletts Hi-Fi was warned that it could be made jointly and severally liable for the unpaid VAT of another VAT-registered business when buying or selling specified goods such as electronic goods and that more information could be found in PN726 – “Joint and several liability for unpaid VAT” and referred to read How To Spot Missing Trader Fraud. v) On 30/07/15 HMRC Officers had a meeting with her co- directors and the company’s accountant at Bartletts Hi-Fi’s trading premises where it was confirmed that the company was trading in high end audio equipment on the retail side, and from period 03/15 her co-director was operating the wholesale side which traded in TVs, Solid State Drives, Iphones and Ipads and a co-director was given a copy of How To Spot Missing Trader Fraud to read. vi) On 20/08/15 HMRC emailed Bartletts Hi-Fi, a co-director and the company’s accountant providing feedback on the visit of 30/07/15. HMRC advised that their publications Notice 725 - “The Single Market” and PN726 should be read, that IMEI numbers for mobile phones should be kept and to take account of trading partner's geographical location and whether the director's residence was different to their company’s as this can be a high risk indicator and to read the KYC advice and risk indicators in Excise Notice 196. vii) On 25/11/15 a HMRC Officer e-mailed Bartletts Hi-Fi and the company’s accountants informing that they had been appointed as the company’s VAT officer and attached a copy of HMRC’s notification letter and VAT validation information which provided further information for companies operating in trade sectors deemed to be at high risk of VAT fraud. b) Bartletts Hi-Fi’s trading had some common features of MTIC fraud which should have put the directors on enquiry regarding the legitimacy thereof, as follows: i. Goods traded were electronic and traded in bulk i.e. high MTIC risk goods such as TVs, Solid State Drives, Iphones, Ipads, Sony Playstations, Microsoft Xbox, Microsoft Office etc. ii. In common with other companies trading in MTIC goods Bartletts Hi-Fi’s accounts show that the turnover had a dramatic increase when the company entered wholesale trading in 2015. In 2014 the turnover from retail only sales was £565,518 which jumped nearly eight fold to £4,430,578 in 2015 and then doubled again to £9,254,628 in 2016 and then jumped to £10,296,371 in 2017. iii. At the meeting with HMRC on 30/07/15 her co-director confirmed that all deals were carried out on back to back basis. iv. There was no commercial reason to purchase European spec goods (e.g. Televisions) from Poland, import them into the UK and then export them to the Czech Republic. v. Bartletts conducted its wholesale trades in Euros even when goods were sold UK to UK, this did not make any commercial sense. vi. HMRC informed Bartletts Hi-Fi that at least six of its trading partners had their VAT number cancelled and issued veto letters meaning that any Input Tax claimed in relation to transactions involving these suppliers which purport to have taken place after the effective date of cancellation of registration, may fail to be verified. c) HMRC have supplied some deal logs and where the whole supply chain has been established, Bartletts Hi-Fi’s trades had the following further contrived arrangements and features: i. In period 06/16, 25 complete supply chains were identified and they show: • 9 deals were completed on the same day on back to back basis. • 15 deals had zero stock left over i.e. stock was matched exactly and 10 deals had between 1 and 568 units of stock left over. • 16 deals were completed on a different day, however, in 9 of these deals the customer’s invoice pre-dated the supplier’s invoice from 1 day to 8 days thereby indicating pre-orchestration. • Another anomaly noted is that 12 of the deals are showing a loss in the mark ups and profit which would indicate that the deals were not genuine. ii. In period 09/16, 19 complete supply chains have been identified and they show: • 9 deals were completed on the same day on back to back basis. • 13 deals had zero stock left over i.e. stock was matched exactly and 6 deals had between 10 and 568 units of stock left over. • 10 deals were completed on a different day, however, in 6 of these deals the customer’s invoice pre-dated the supplier’s invoice from 3 days to 8 days thereby indicating pre-orchestration. • Another anomaly noted is that 7 of the deals are showing a loss in the mark ups and profit which would indicate that the deals were not genuine. iii. In period 12/16, 10 complete supply chains have been identified and they show: • 1 deal was completed on the same day on back to back basis. • 6 deals had zero stock left over i.e. stock was matched exactly and 4 deals had between 42 and 500 units of stock left over. • 9 deals were completed on a different day, however, in 2 of these deals the customer’s invoice pre-dated the supplier’s invoice by 1 to 4 days thereby indicating pre-orchestration. • Another anomaly noted is that 3 of the deals are showing a loss in the mark up and profit which would indicate that the deals were not genuine. iv. In period 03/17, 10 complete supply chains have been identified and they show: • 1 deal was completed on the same day on back to back basis. • 6 deals had zero stock left over i.e. stock was matched exactly and 4 deals had between 42 and 500 units of stock left over. • 9 deals were completed on a different day, however, in 2 of these deals the customer’s invoice pre-dated the supplier’s invoice by 1 to 4 days thereby indicating pre-orchestration. • Another anomaly noted is that 3 of the deals are showing a loss in the mark up and profit which would indicate that the deals were not genuine. v. In period 06/17, 7 complete supply chains have been identified and they show: • 2 deals had zero stock left over i.e. stock was matched exactly and 5 deals had between (-333 i.e. minus) and 1,060 units of stock left over. • All 7 deals were completed on a different day. • Another anomaly noted is that 3 of the deals are showing a loss in the mark up and profit which would indicate that the deals were not genuine. vi.In period 09/17, 3 complete supply chains have been identified and they show: • All 3 deals were completed on a different day. • All 3 deals had between 80 and 3,800 units of stock left over. • Another anomaly noted is that 2 of the deals are showing a loss in the mark up and profit which would indicate that the deals were not genuine. d) For period 12/17, insufficient information was provided to HMRC to establish full supply chains although electronics goods such as wireless headphones and Sony PS4s are seen being purchased from the usual suppliers. i) Bartletts Hi-Fi conducted its wholesale trading via an Alternative Banking Platform (“ABP”), which are a kind of virtual financial institution that provides the functionality of a traditional bank but without a bank’s reporting or regulatory requirements or transparency, thereby facilitating fraudulent activity. ii) Despite the warnings given about the use of ABPs to Bartletts Hi-Fi in their education letter of 14/07/15, HMRC noted that Bartlett’s Hi-Fi was using an ABP to conduct its wholesale business. iii) On 06/06/17 HMRC wrote to the company’s accountants informing that Plutus FX had been seen as a vehicle for payment of monies into the company’s account and required information on the customers that were using this foreign exchange service. iv) The company accountants confirmed that Bartletts Hi-Fi was using the ABP to transfer money from the Pound account to the Euro account but failed to provide information on the customers using the ABP. e) Although being aware of MTIC VAT fraud in Bartletts Hi-Fi’s trade sector and engaging in transactions bearing the features of such fraud, she failed to ensure that Bartletts Hi-Fi carried out effective steps, due diligence or other checks in respect of its trade and trading partners. i) At the meeting with HMRC Officers on 11/02/15 her co-director was informed that the wholesale electronics sector was considered high risk for VAT fraud and he was asked about what he knew about KYC checks, of which he had a basic / good understanding. ii) By letter dated 14/07/15 HMRC informed Bartletts Hi-Fi on risks associated with Missing Trader Intra Community Fraud and procedures for validating VAT registration details of trading partners with HMRC. Bartletts Hi-Fi ignored this requirement and only twice requested VAT validation on 15 and 16/12/15. On each occasion the validation request was on the supplier, which HMRC positively validated on 17/12/15. iii) At the meeting with HMRC Officers on 30/07/15 her co-director informed the Officers that he carried out KYC checks when he receives the customer’s purchase order. He said he requested company documents such as VAT certificates, terms and conditions and UK and EU photo ID of the directors. iv) In their input tax denial letters HMRC also confirmed that Bartletts Hi-Fi’s due diligence was lacking. v) Company records collected by the liquidator do not contain any due diligence, VAT validation requests, VAT certificates, terms and conditions, photo IDs etc. vi) Bartletts Hi-Fi traded with several suppliers and customers with whom it carried out wholesale trade between 03/15 and 12/17 and should have validated each one before carrying out trade with them. This indicates that the directors were not worried about carrying out the validations because they knew that each trade was pre-determined and there was no chance of the trades failing. f) Furthermore, the trading chains in which Bartletts Hi-Fi was involved were associated with significant loss to the UK and EU member state public purse. Some notable tax losses notified to the company were: i) Despite warnings and education to establish the integrity of supply chains being given to Bartletts Hi-Fi prior to starting wholesale trading in bulk electronics goods, tax losses were incurred by its customer Company T in every period of 2015 in the EU. Bartletts Hi-Fi had made sales to Company T between 25/08/15 – 16/10/15 totalling £686,978. ii) In period 12/15 Bartletts Hi-Fi’s supplier Company B caused fraudulent tax losses of £10,010. Company B caused additional fraudulent tax losses of £335,230 in period 03/16. iii) In period 06/16 Bartlett’s Hi-Fi’s supplier Company C caused fraudulent tax losses of £12,379. iv) In period 12/16 Bartletts Hi-Fi’s EU supplier Company D caused fraudulent tax losses of £50,454. v) In period 03/17 Bartletts Hi-Fi’s supplier Company E caused fraudulent tax losses of £51,206 which was in addition to tax losses of £20,000 already notified to Bartletts Hi-Fi in a letter by HMRC dated 13/04/17. vi) In period 09/17 Bartletts Hi-Fi’s supplier Company F caused fraudulent tax losses of £86,266 and in 12/17 the same supplier caused fraudulent tax losses of over £43,000. vii) In their letter to Bartletts Hi-Fi of 17/05/18 HMRC had informed that the cumulative value of tax losses notified to the company to date was £626,584. g) Given the warnings of MTIC fraud, the hallmarks of Bartletts Hi-Fi’s trading scheme and the lack of adequate checks, the directors should not have expected HMRC to allow input VAT claimed for the 03/16, 06/16, 09/16, 12/16, 03/17, 06/17, 09/17 and 12/17 totalling £2,646,905. HMRC gave the following reasons for their denial decisions. i) The deals in question were connected with fraudulent tax losses. ii) Despite the high value of the goods being traded, Bartletts Hi-Fi failed to enter into written contracts or had terms of business which adequately protected its interests in the event that goods purchased were faulty, missing, damaged or not to the correct specification. iii) The purchase invoices supplied to HMRC did not contain the elements associated with a genuine commercial supply such as a retention of title clause, payment terms, sequential numbering and an accurate description of the goods being supplied. The absence of these details did not concern the directors because they knew that these were not genuine commercial transactions but were instead connected with fraud. iv) Records supplied to HMRC showed no contracts, price negotiation or other documentation in support of the invoices; the willingness to undertake such high value transactions without the need for written contracts indicates that the directors knew the deals could not fail because they were predetermined and connected with fraud. v) Since early 2015 Bartletts Hi-Fi had received advice and warnings from HMRC both verbally and formally with the issue of letters and publications such as MTIC awareness letters, veto letters, Notice PN726 Joint and Several Liability, which informed the company of the high risk of VAT fraud in the wholesale of electronic goods, and the need to take measures to minimise the risk of involvement with fraud. Despite this extensive general awareness of fraud Bartletts Hi-Fi still went ahead and traded with its suppliers and customers without undertaking meaningful checks. vi) The trading of wholesale goods was undertaken in a distinctly different manner to those undertaken in the retail side of the company’s business; retail goods were usually purchased from an established authorised distributor or manufacturer, were billed and paid for on a trade account with terms and conditions, and were delivered into a store where the goods could be inspected and demonstrated to potential customers. Furthermore, Bartletts Hi-Fi requested a formal review of HMRC’s assessment of the company’s input tax claims on which HMRC carried out assessments after the company’s failure to provide sufficient evidence for the input tax claims as follows: 12/15 claimed £121,129.41 assessment £101,824 issued 8/4/16 06/16 claimed £855,879.25 assessment £353,834 issued 1/11/16 09/16 claimed £1,048,898 assessment £1,048,898 issued 23/12/16 HMRC carried out an independent review of the assessments and issued their decision to the company on 24/05/17 upholding their decision and concluding, “Each assessment has been validly made within the appropriate timing provisions. There still remains insufficient evidence to support your claim to input tax, the decision to assess input tax in periods 12/15, 06/16 and 09/16 is therefore upheld.” Bartletts Hi-Fi was given 30 days to appeal to a tax Tribunal but did not pursue this option. 

This information is correct as at 6 / 5 / 2022



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