Three years for imaginary sheep scam

In the first prosecution of its kind, a man who reclaimed nearly £1million VAT for a business which traded in non-existent sheep was jailed on 6 February for three years and nine months. Richard James Coate, of Owls Hill Farm, Broomfield, Somerset was convicted in November of Cheating the Public Revenue to the value of £865,799.27.

The Revenue and Customs Prosecutions Office have started confiscation proceedings under the Criminal Justice Act to recover some £800,000 of assets.

Sentencing Coate at Bristol Crown Court, His Honour Judge Lambert, the trial judge said: "This was a cunning, sustained fraud in which you secured in excess of three quarters of a million pounds from the State. I accept that you propped up an ailing farming business, but that was at the expense of the taxpayer. A legitimate business started by you began to fail and you turned to fraud on a grand scale, albeit not the most sophisticated fraud that has been seen."

Between June 1997 and June 2001, Coate made fraudulent claims under the Agricultural Flat Rate Scheme, which was designed to compensate farmers for their VAT inputs without the burden of administration.

During that period, he claimed to have traded some 425,000 sheep with a mysterious Spanish gentleman called Questos. In fact the paper process consisted of four stages. Questos 'sold' livestock to Coate, which he then sold on to a company he owned, Owls Hall Farm Ltd. The same animals were then 'sold' back to Coate, and finally back to Questos.

In interview, Coate was unable to provide any information about Sr. Questos. It was eventually established that a Spanish farmer of that name had purchased a small number of sheep from Coate some time before 1992, but had absolutely no involvement in the fraud.

The most significant evidence at the trial covered the period during the outbreak of Foot and Mouth disease which started in February 2001. Coate's record showed he was trading many thousands of sheep with Questos, at a time when there were strict movement restrictions on livestock in his area. When all the stock at his farm had to be slaughtered, there were 62 animals, and Coate only owned 29 of those. His records showed he had just taken delivery of 2,500 animals but there was no evidence of these.