Sandbanks resident Jamie Colwell, 51, his father Brian Colwell, 74, of Bournemouth, and Jamie’s former partner Briony James, 45, of Salisbury, claimed to have spent £14m building new houses.
But a HM Revenue and Customs investigation revealed not a single brick had been laid.
Ringleader Jamie Colwell set up Robert Lloyd Properties Ltd and Belgravia Construction Services (South) Ltd to carry out the VAT fraud.
His father, a retired builder, was a director of both companies, while Jamie’s former partner was a director of Robert Lloyd Properties.
Jamie Colwell also pretended to be another director Martin Johnstone.
They used the two businesses to fraudulently claim VAT repayments totalling £965,897 between February 2009 and May 2015.
Investigations revealed the companies’ bank accounts were simply used to fund the criminals’ lifestyles.
At Bournemouth Crown Court Jamie Colwell was sentenced to five years and three months imprisonment, Brian Colwell was jailed for 32 months and Briony James was given a 20 month sentence behind bars.
Both Jamie and Brian Colwell absconded and were sentenced in their absence. Warrants have been issued for their arrest.
Richard Wilkinson, Assistant Director, Fraud Investigation Service, HMRC, said: “These criminals set up sham companies solely to pocket public money to fund their lifestyles, blatantly stealing almost £1 million from the public services we all rely on.
“HMRC will continue to pursue those criminals who attack the tax system, and look to recover the proceeds of their crimes from current and future wealth.”
The fraud was discovered by HMRC’s VAT Repayment Taskforce which carried out checks on the businesses.
No credible evidence of any property sales was provided to HMRC and a criminal investigation revealed the scale of the fraud.
Jamie Colwell used £113,000 of the fraudulent funds to rent a Sandbanks property and pay household expenses.
He spent another £64,000 on cars including a pre-owned Porsche 911, which he has since sold. He also owned a speedboat.
Briony James and Brian Colwell
His father used the money to rent a four-bedroom Bournemouth home and on general good living. Briony James, a former equestrian and dressage competitor, spent more than £100,000 of the criminal funds on stabling her horses, £40,000 on designer clothing and shopping, and £38,000 on cars including a Mercedes.
Jamie Colwell pleaded guilty to the full fraud of £965,897. Brian Colwell admitted defrauding £178,487 relating to Belgravia Construction Services (South) Ltd, and Briony James admitted defrauding £316,335 as Robert Lloyd Properties Ltd.