A businessman who set up his own payroll company for construction workers who were self-employed has been jailed for fraud.

Paul Marsh was the director of the company. In court Mr. Marsh admitted to making three fraudulent VAT declarations. The declarations that Mr. Marsh made to HMRC had the effect of reducing the amount of tax his company, Draco Consulting Services, owed to HMRC by £1.3 million. The money that Mr. Marsh stole was then used to help prop up Marlin Resources UK Ltd which was another company owned by Marsh. This company was having financial problems. Both of the companies were providing payroll services to self-employed construction workers.

Mr. Marsh’s activities came to an end when investigators from HMRC found evidence in the companies’ bank accounts that proved Marlin Resources UK Ltd had not paid all its VAT and that Draco Consulting Services Ltd had never been in a position to pay the tax it owed. The total amount fraudulently stolen by Marsh was £1,337,311.

After the verdict Mr Marsh was given a jail term of four years and three months.

Richard Young, HMRC’s assistant director of the fraud investigation service said “Marsh was naïve to think he could get away with this fraud. He was using the tax system like a private bank loan, to prop up his second business, which was struggling financially. By depriving public services of vital funding, financially he had an unfair advantage over honest competitors.”

Both of Mr. Marsh’s companies were wound up in December 2008 when both went into voluntary liquidation. However, investigations revealed that £150,000 had gone into another company of which Marsh was a director.