Harrow and Oxford educated Sheel Khemka set up 12 companies and used them to front his scam. He used false names and fake invoices, claiming that he was selling millions of pounds worth of expensive designer jeans.

But he only made three importations, worth £24,000, using the same jeans each time he attempted to claim VAT back from HMRC.

Khemka submitted 12 VAT repayment claims between May and October 2009, totalling £1,043,933, receiving almost £498,000 in refunds. A further 11 claims totalling more than £500,000, submitted during 2009, were not paid out by HMRC.

An HMRC investigation found Khemka located his business premises in London and across various English counties, often renting office and warehouse space at short notice just before a visit by HMRC to check the repayment claims. Most of the company names were initially registered to his London residential address, at a family-owned property in Mayfair, with ‘offices’ moving to various locations including Clacton, Penzance, Retford, Bognor Regis and Milton Keynes.

The small quantity of designer jeans actually purchased from the US were moved from business to business, with new packaging and labels, in an attempt to show that they had just been imported.

Khemka printed fake invoices, sales orders and other documents shortly before each meeting with HMRC, and even asked innocent local accountancy firms to sit in on the visits, to add legitimacy. He even used the names of friends and acquaintances during the fraud.

The fraud was uncovered after investigators became suspicious about his trading activity and VAT claims. They found that Khemka had left a trail of unpaid bills and empty offices. He used five different names to sign the VAT forms and to arrange meetings with HMRC.

At the time of his arrest, Khemka told HMRC officers that he held no business records. The details were discovered on his computer by investigators, who also uncovered an elaborate web of financial transactions between the retail and wholesale companies Khemka controlled. Investigators also gathered evidence of Khemka’s fraudulent activity by interviewing witnesses in the UK and US.

Khemka was found guilty by unanimous verdict at Croydon Crown Court and jailed for five years. He was also banned from operating as a company director for seven years. The money fraudulently obtained has since been paid back.

His Honour Judge N J Ainley, said: ‘The scheme was dishonest from the start. I have severe doubts if jeans existed at all and you set up companies using the hijacked identities of friends. This was a sophisticated and well-planned fraud from which you used a lot of money on yourself.’

Alan Tully, assistant director, fraud investigation service, HMRC, said: ‘Khemka set up this fraud through greed, to fund a lavish lifestyle at the taxpayers’ expense. Using the proceeds of his crime he bought a luxury home in Gloucestershire and a top-of-the-range Mercedes car. If he had not been stopped by HMRC officers he would have stolen millions of pounds of VAT.

‘This was a sophisticated fraud that involved detailed planning and forgery, all for the benefit of one criminal.’