Dominic Chappell, Sentencing Remarks 5 November 2020

In Dominic Chappell, Sentencing Remarks 5 November 2020, the defendant, convicted by a jury of three counts of cheating the public revenue through the dishonest non-payment of VAT, corporation tax and income tax, was sentenced to six years’ imprisonment on each count, concurrent.

The offending arose from the acquisition of the British Home Stores chain from the Arcadia Group for £1 on 11 March 2015 through the defendant’s company Retail Acquisitions Limited (RAL). For his services he was entitled to consultancy and success fees totalling £622,000, payable through another of his companies, Swiss Rock, which would invoice for them. In the weeks after the purchase much larger sums were paid by RAL into his personal account and to Swiss Rock, later invoiced to RAL as including VAT, and a RAL board resolution of 22 April 2015 increased his consultancy fee after the event to £1,770,000 including VAT. He also drew a director’s salary from BHS Group Limited.

Swiss Rock was liable to register for VAT, which it did with effect from 1 May 2015, after the defendant had falsely told HMRC there had been no receipts in March, so avoiding a late notification penalty. No VAT return was ever filed before Swiss Rock went into creditors’ voluntary liquidation in September 2016. The defendant paid the first prime assessment of £8,433, which the judge found was buying time. Net VAT due to 31 July 2016 was £351,944, while RAL successfully reclaimed the VAT it had paid. The accountant sent the defendant approved accounts and a corporation tax return identifying a liability of £196,053.45 due on 3 January 2016, and personal drawings of £363,000 were treated, with the defendant’s agreement, as dividends, giving an income tax liability of £86,163.52 due on 31 January 2016.

The defendant accepted that he could pay. Instead he holidayed on a yacht bought in his name with RAL money, and on his return bought a Bentley, a pair of Beretta guns and a Land Rover, while sums continued to flow to him from RAL. He ignored assessments, reminders, final demands and warnings of winding up, and in February 2016 promised HMRC payment in full. The judge was sure that his later account, that he never believed corporation tax was due and that the accounts were misstated, was invented after he consulted a tax adviser in May 2016 when a criminal investigation became possible. The experts, the accountant and RAL’s own accountant all agreed the taxes were due. The judge found that he cynically allowed Swiss Rock “to go to the wall” in the hope that HMRC would “whistle in the wind” for the tax.

Under the Fraud, Bribery and Money Laundering guideline for revenue fraud, it was common ground that culpability was high (category A): the evasion was sustained, the defendant abused his position as a director, and he pursued a relatively sophisticated course of conduct, fobbing off HMRC for months and delaying winding up action. Harm was assessed across all three counts. The judge accepted the Crown’s figures as due, totalling £602,172.20, then deducted the £8,433 paid towards VAT and £10,000 paid towards corporation tax, giving £583,739.20. That placed the offending in category 4, with a starting point of seven years and a range of five to eight years. A downward adjustment was appropriate because the starting point assumed £1,000,000, but, as was common ground, concurrent sentences with the multiplicity of offences treated as aggravating justified an upward adjustment, taking care to avoid double counting. The net result before mitigation was just over seven years.

Previous motoring convictions were disregarded, but four bankruptcies, company insolvencies and a 2018 conviction under section 77 of the Pensions Act 2004 for refusing to provide information to the Pensions Regulator meant the defendant could not rely on an absence of relevant convictions; they did not increase seriousness.

The judge rejected the mitigation that the fraud had little prospect of success, describing non-payment followed by liquidation as “one of the oldest tricks in the book”, and rejected the suggestion that the activity was originally legitimate: the activity was the evasion, unlawful from the start. The four-year delay was taken into account between apprehension and trial, though much of it was inevitable in a complex documentary investigation. The pressure of trying to save BHS before its administration on 25 April 2016 was taken into account but mitigated little, since the defendant had time to buy luxuries. His loss of marriage, reputation and means, his role as primary carer for elderly and unwell parents, his young son with learning difficulties, and the guidance in R v Manning on the impact of the pandemic were all considered. Only immediate custody was justified, and the sentence was six years’ imprisonment concurrent on each count, with release on licence at the halfway point.