Company director Paul Marsh admitted making three fraudulent VAT declarations to HMRC for his company Draco Consulting Services which reduced the amount of tax owed by £1.3m.

He then used the money he stole to sustain his other company, Marlin Resources UK Limited, which was in financial difficulty.

Marsh owned and operated both companies which provided payroll services to self-employed tradesmen working locally in the construction industry.

HMRC investigators uncovered evidence from the bank accounts of both companies proving that Marlin Resources UK Limited had not paid all of the VAT it owed, and that Draco Consulting Services Limited could not pay the tax it owed due to its financial position.

Although both companies went into voluntary liquidation in December 2008, it was discovered that £150,000 had been transferred to another company, which Marsh was also a director of.

Richard Young, assistant director, fraud investigation service, HMRC, said: ‘Marsh was naive 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.’