A BUSINESSMAN who carried on trading while Her Majesty's Revenue and Customs investigated whether he should pay a £36,000 deposit towards tax has been ordered to pay compensation.

Appearing before Caerphilly Magistrates Court yesterday, John Scott Harrison, 67, of Clos Lon Fawr in Beaufort, Ebbw Vale, admitted 10 counts of supplying goods without giving a security when required.

In July this year Harrison denied the charges, but later indicated he would change his plea.

Harrison, now retired, was asked to pay a £36,474 deposit to HMRC in case he failed to pay VAT for his hardware business, Richards of Abergavenny Limited, in September 2011.

Upon appeal the amount was dropped to £22,211.70, which he again appealed, but which was dismissed on January 16, 2012 and again on August 13, 2012.

But the businessman continued to trade during that time, turning over sums ranging from £76,665.26 to £24,267.68 a month between October 2011 and the end of July 2013.

Joseph Edwards, prosecuting, said where there is a risk that VAT may not be paid by a company, HMRC can serve a notice to pay up front.

Other companies associated with Harrison, including EWP Electrical and RGA Abergavenny, owed £44,514.44-worth of VAT at that time, while Richards of Abergavenny Limited itself had a VAT bill of £4,411.70 outstanding.

A series of letters were sent to Harrison, either hand-delivered to the business, posted to the shop or to his solicitor, but not all were received, the court heard.

Between March and July 2012, VAT bills ranging from £4,853.54 to £7,369.80 were not paid.

David Lewis, mitigating, said Harrison had been in business more or less by himself since he was 17 years old and had never been in court before this case.

He said in the economic climate, Richards of Abergavenny had gone into liquidation a year ago and that it had been a difficult time for the family.

Magistrates found it was not a deliberate act of evasion and said HMRC's manner of delivering letters had not helped the situation, and Harrison had had poor advice in matters of law.

They sentenced him to pay compensation of £20,000 and costs of £400.

Zoe Ellerbeck, assistant director in criminal investigations for HMRC, said: "Insolvent traders contribute to the UK’s tax gap so anyone registering for VAT, who has a previous history of failed enterprises, may be asked for security against potential losses. This is certainly the case where a business ceases to trade only to be replaced by a new one offering similar or identical services.

"It is only right to tackle non-compliance, not least to reassure those businesses who do pay their dues that we will take precautionary action against those who may not."