Four men have been jailed for a total of 57 years for running an elaborate VAT fraud that cheated the taxpayer out of ?10 million.

The deception, which centred on the trading activities of a Scottish company called Virgini Ltd, involved making false VAT claims for mobile phones that were supposedly being imported into the UK and exported to Ukraine. In fact, there was no evidence the mobiles ever existed.

Durgesh Mehta, 51, the company's director, was jailed for a total of 33 years after being convicted of cheating the public revenue, money laundering and conspiracy to transfer criminal property under the Proceeds of Crime Act. His sentences will run concurrently.

advertisementThe wealthy solicitor lived in the stockbroker-belt village of Chalfont St Peter, Buckinghamshire, and commuted weekly to Scotland.

His three accomplices ? Gerald Reardon, 55, from Kent, Matthew Sharman, 43, from Essex, and Peter Ratcliff, 54, from Surrey ? each received eight-year prison sentences for laundering the proceeds through offshore companies.

The case represents one of the biggest successes against "Missing Trader Intra-Community" fraud, an extensive and prevalent crime expected to cost the Treasury as much as ?6.7 billion this year - the equivalent of 2.5p on income tax, or enough cash to build and equip 16 hospitals or 400 secondary schools.

In its simplest form, a trader imports goods free of VAT, charges the 17.5 per cent tax when he sells them on to someone else, but then, instead of passing it over to Revenue and Customs, disappears, keeping the money. In more sophisticated versions the trader imports the goods, sells them on, with VAT added, to an associate who re-exports them, claiming the VAT back from Revenue and Customs, and later re-imports them, so that the whole procedure begins again. This is known as carousel fraud.

In the Virgini case, the company received ?7 million in VAT repayments for its phantom trading operations between July and October 2003. Mehta tried to conceal the bogus transactions with thousands of fake documents. The total VAT claimed by Virgini in the period the transactions took place was ?10 million.

The gang's cover was blown when Reardon asked a security company to deliver bundles of cash adding up to more than ?2 million to his home and to a disused airfield in Kent.

The security company tipped off the Revenue, who swooped when the next delivery was made to Reardon's office in south London, seizing just under ?1 million. When officers seized containers at Southampton docks said to hold mobiles they found that they contained worthless furniture.

Judge Adele Williams, sentencing the gang at Canterbury Crown Court, said: "The sheer extent of the lies and dishonesty involved was breathtaking."

Debbie Hayman, a senior Revenue and Customs investigator, said: "This sends out a clear message to those involved that we are committed to tackling VAT fraud."