Malcolm Maclean, 49, director of Shildon accountancy firm Maclean Fisher Tait Accounting & Taxation was jailed for three years after setting up two labour-only contracting businesses to carry out the fraud.

Maclean falsified documents and manipulated clients’ accounts to cover up tax and CIS frauds.

Two companies, Workforce and MFT Utilities Ltd, were set up to act as labour-only contractors for the building trade.

They took on construction projects and then sub-contracted the building work to local self-employed tradesmen.

All of these tradesmen were clients of the accountancy firm, but had no knowledge it was behind the contracts.

HMRC said that the sole purpose of setting up contractor companies was to steal money from the taxpayer.

As the sub-contractors hired by Workforce and MFT Utilities Ltd were also clients of the accountancy firm, it was able to manipulate clients’ CIS returns to pay over less tax than was collected, pocketing the difference of £358,000.

Tax due was reduced by changing documents to claim for the cost of materials, even though materials were never provided as part of the sub-contractors’ service.

Malcolm Maclean, a former Inland Revenue trainee tax inspector, was sentenced yesterday at Newcastle Crown Court to three years in prison after pleading guilty at an earlier hearing.

Sentencing him yesterday, His Honour Judge Recorder Ekins said: “You meticulously planned this sophisticated fraud and I see your previous employment with HM Revenue and Customs as an aggravating feature to this crime.”