The director of a Manchester pizza takeaway who fraudulently claimed a £20,000 bounce back loan has been jailed for two years
Abdulrazag Zagroba, 54, from Manchester, appeared at Manchester Crown Court on Friday 24 June 2022 where he was sentenced to 24 months before Recorder Hudson.
This was the first successful criminal prosecution of a bounce bank loan fraudster for the Insolvency Service, which also saw Zagroba disqualified from acting as a director for seven years. Until now the only penalty for abuse of bounce back loans has been director bans.
The court heard that Zagroba was sole director of Amigo Pizza (Manchester) Ltd, incorporated in January 2020. The company operated a pizza takeaway business in the Stretford area of Manchester until it was dissolved in October the same year.
Zagroba’s application to dissolve the company was originally signed on 17 June 2020 but less than two weeks later, he applied for a bounce back loan of £20,000.
He did not disclose to the bank that the company was already in the process of being dissolved and he signed the loan declaration stating the company would be able to make repayments. By the time the loan was due to be repaid in June 2021, the company had already been dissolved.
The terms of the bounce back loan were clear that funds could only be used for business purposes and not personal use.
However, when interviewed under caution by Insolvency Service investigators, Zagroba admitted to having no intention of using the bounce back loan for the business.
Zagroba claimed that he arranged for friends to travel with around £14,000 in cash to give to his family abroad. He used the remaining £6,000 to buy a car and insurance.
He pleaded guilty to charges of fraudulently claiming Covid-19 financial support to which he was not entitled contrary to the Companies Act 2006 and the Fraud Act 2006 at Manchester City Magistrate’s Court on 9 May.
Julie Barnes, chief investigator at the Insolvency Service said: ‘Covid loans were designed to support viable businesses during the pandemic. Abdulrazag Zagroba, however, cynically sought to exploit the covid loan scheme and by dissolving his company, he intended to frustrate any attempt by the lender from taking action to recover the outstanding loan.
‘This sentence should serve as a warning to others who engaged in this behaviour, and they should come clean and repay the money before it is too late.’
Three people were arrested after HM Revenue and Customs (HMRC) officers visited businesses across the country in a day of action after new powers were introduced in the fight against till fraud
Businesses involved in making, supplying or promoting electronic sales suppression (ESS) systems that help users hide or reduce the value of till sales, now face fines of up to £50,000 and criminal investigations. Users also face fines as HMRC increases efforts to target the tax evasion practice.
HMRC investigations visited 30 businesses on 18 May including shops, takeaways and restaurants, across nine counties to tackle ESS and two men and a woman were arrested in Nottinghamshire as part of a criminal investigation into the alleged supply of ESS software.
The men, aged 43 and 58, were arrested along with a 56-year-old woman on suspicion of fraud offences and cheating the revenue.
A search warrant was executed by HMRC officers at three addresses and computers, digital devices and paperwork were seized. All three suspects have been released under investigation.
Financial Secretary to the Treasury, Lucy Frazer, said the overwhelming majority of businesses are paying their taxes and rightly want to see HMRC stepping in where needed to ensure a level playing field for all.
“Tax crime does not stand still and neither do we – the new powers available to HMRC allow them to clamp down on ESS and help recover tax revenues to fund our vital public services,” she said.
Marc Gill, HMRC’s director of individuals & small-business compliance, said electronic sales suppression gives the appearance a business is trading legitimately, when in fact they’re really just stealing money from taxpayers.
“We encourage anyone using, supplying, making or promoting ESS to report via our disclosure facility. Making a disclosure is not only the right thing to do it could also lead to a reduction in financial penalties,” he said.
ESS users will either have access to specialist software or will configure their electronic point of sale (EPOS) device in a specific way that allows them to consciously hide true sales and the resulting tax that is due.
Sales processed through the till give the impression they have been recorded as normal, however the end-of-day report is deliberately manipulated behind the scenes to reduce reported takings.
As part of investigations into ESS HMRC can also recover tax evaded and launch investigations that could result in criminal convictions.
HMRC has a voluntary disclosure facility and would encourage anyone using, making, supplying or promoting ESS to contact them. By making a disclosure now those using or benefiting from ESS could see their financial penalties reduced.
In the run-up to the 31 July renewals deadline for tax credits, HMRC has warned that fraudsters are targeting claimants with scam emails, fake websites, and text messages
The warning comes as in the 12 months to April 2022, HMRC dealt with nearly 277,000 referrals of suspicious contact received from the public.
However, this is significantly less than the 1,154,300 referrals that HMRC received in the lead up to April 2021 and was ‘likely due’ to the higher prevalence of the Covid-19 support schemes.
The tax authority expects around 2.1m tax credits users to renew their annual claims by 31 July 2022 and has issued the warning to remind people about the tactics used by criminals who mimic government messages to make them appear authentic.
The tax authority has also restated that it does not charge tax credits users to renew their annual claims and is urging users to be alert to misleading websites or adverts designed to make them pay for government services that should be free, often charging for a connection to HMRC phone helplines.
HMRC also reiterated that they will not call anyone ‘out of the blue’ as fraudsters use phone calls, text messages and emails to try and dupe individuals, often trying to rush them to make decisions.
The typical style that the scammers use to imitate HMRC includes making phone calls threatening arrest if people do not immediately pay a fictitious tax bill owed or claiming that the victim’s national insurance number has been used fraudulently.
Scammers will also use emails or texts to offer fake tax rebates or Covid-19 grants, they may also claim that a direct debit payment has failed.
HMRC’s cyber security operation team identifies and closes down scams every day. The department has pioneered the use in government of technical controls to stop its helpline numbers being spoofed, so that fraudsters can no longer make it appear that they are calling from those HMRC numbers.
Myrtle Lloyd, director general for customer services, HMRC said: ‘We are urging all of our customers to be really careful if they are contacted out of the blue by someone asking for money or bank details.
‘There are a lot of scams out there where fraudsters are calling, texting, or emailing customers claiming to be from HMRC. If you have any doubts, we suggest you do not reply directly, and contact us straight away. Search gov.uk for our ‘scams checklist’ and to find out how to report tax scams’.
HMRC is warning university students to be wary of potential scams, especially if they have a part-time job and are new to interacting with the tax office
University students taking part-time jobs are at increased risk of falling victim to scams, HMRC said.
By June this year, more than 680,000 students had applied to university, and over 900,000 held part-time jobs during the 2020 to 2021 academic year.
Higher numbers of students going to university this year means more young people may choose to take on part-time work. Being new to interacting with HMRC and unfamiliar with genuine contact from the department could make them vulnerable to scams.
In the past year almost one million people reported scams to HMRC.
Nearly half of all tax scams offer fake tax refunds, which HMRC does not offer by SMS or email. The criminals involved are usually trying to steal money or personal information to sell on to others. HMRC is a familiar brand, which scammers abuse to add credibility to their scams.
Links or files in emails or texts can also download dangerous software onto a computer or phone. This can then gather personal data or lock the recipient’s machine until they pay a ransom.
In the two-month period April to May this year, 18 to 24-year olds reported more than 5,000 phone scams to HMRC.
Mike Fell, head of cyber security operations at HMRC, said: ‘Most students won’t have paid tax before, and so could easily be duped by scam texts, emails or calls either offering a ‘refund’ or demanding unpaid tax.
‘Students, who will have had little or no interaction with the tax system might be tricked into clicking on links in such emails or texts.
‘Our advice is to be wary if you are contacted out of the blue by someone asking for money or personal information. We see high numbers of fraudsters contacting people claiming to be from HMRC. If in doubt, our advice is do not reply directly to anything suspicious, but contact HMRC through gov.uk straight away and search gov.uk for ‘HMRC scams’.’
In the last year (September 2020 to August 2021) HMRC has:
- responded to 998,485 referrals of suspicious contact from the public. Nearly 440,730 of these offered bogus tax rebates;
- worked with the telecoms industry and Ofcom to remove 2,020 phone numbers being used to commit HMRC-related phone scams;
- responded to 413,527 reports of phone scams in total, an increase of 92% on the previous year. In April last year we received reports of only 425 phone scams. In August 2021 this had risen to 3,269;
- reported 12,705 malicious web pages for takedown;
- detected 463 Covid-19 related financial scams since March 2020, most by text message; and
- asked internet service providers to take down 443 Covid-19 related scam web pages.