The UK's Insolvency Service announced that two directors of YSK Enterprises Ltd have each been banned from acting as company directors for nine years following an investigation. The investigation centered on imported disposable vapes from China, falsely labeled and presented to the customs office as medical nebulisers. The scheme operated by these two directors resulted in unpaid VAT, customs duties, and corporate tax.

How the Scheme Worked

Between February and April 2023, the company imported vapes from China. Border Force intercepted one shipment of 352,688 e-cigarettes at Harwich after discovering it had been falsely classified as medical nebulisers, preventing it from entering the UK. The false description appears to have been used to conceal the true nature of the goods and avoid the applicable tax, customs and corporate obligations.

Consequently, HMRC investigated the company. The company claimed that it did not owe any VAT on its sales to HMRC and failed to submit corporation tax returns. However, after completing the investigation, HMRC determined that the company owed almost GBP 15 million in unpaid VAT and customs duty, together with another GBP 437,101 in corporation tax.

The investigation also identified problems with the company’s financial records. One of the directors failed to preserve the company’s accounting records despite repeated requests from the liquidator. This made it impossible for investigators to establish what had happened to more than GBP 1.6 million in company assets, including land, machinery, and vehicles.

Conclusion

The investigation involved not only the alleged use of false labels and customs classification to facilitate the importation of vapes and avoid taxes, but also significant failures in tax reporting and record-keeping. As a result of the investigation and HMRC's conclusions, the two directors are disqualified from managing, forming, or promoting a company without the permission of the court.