A leading member of a gang who set up 23 fake construction companies to steal £4 million in a VAT fraud has been jailed.

Adam Chadderton, 29, of Fernleigh, Leyland was found guilty and was sentenced to three and a half years in prison.

Chadderton was one of the key leaders in the fraud, working at Forte Accountants based on New Hall Lane, Preston.

The gang used ”puppet” directors, fake invoices and bogus building contracts for housing developments as a smokescreen to hide their criminal activity. People were paid up to £35,000 to act as directors and allow the gang to use their names and addresses to set up the bogus companies, with the sole purpose of claiming illegal VAT refunds.

HMRC officers became suspicious after they carried out checks on a number of companies involved in the building trade across the North West of England.

They discovered that many of the companies were linked — regularly providing services to each other and using the same accountant.

They also used the same invoices, receipts and accounts figures to make sizeable claims for VAT refunds.

Jo Tyler, Assistant Director, Criminal Investigation, HMRC, said: “This was a deliberate attack on the UK VAT system to fund criminal lifestyles.

“Tax fraud and attempts to launder the proceeds of crime are treated extremely seriously by HMRC.”

Several key players in the fraud were put under surveillance as evidence built up against the gang and in 2011 HMRC officers searched 21 premises, making 16 arrests across the North West and in Sussex.