Two men have been jailed for five years after avoiding £2.5million in a tax and VAT fraud linked to the supply of labour to the railway industry.

Richard Ponsford, 36, of Brentwood Road in Ongar, and Michael Woodward, 30, of Blackshots Lane in Grays, were jailed on Wednesday following an investigation by HM Revenue and Customs.

For seven years, Woodward failed to pay business taxes for the companies he ran. He also lied about company profits and created false invoices from bogus consultancy firms, controlled by close friend, Ponsford.

During a three week trial at Southward Crown Court, the jury heard the men under-declared their profits to reduce the Corporation Tax due and used fake consultancy invoices to reduce their VAT payments by £2.5m.

Between 2004 and 2011, Ponsford made 387 cash withdrawals, which the men used to supplement the wages of employees and family members. 

The pair were arrested in March 2011 after HMRC officers searched residential and business premises in Essex. 

For more on this story, see next week's Guardian - out Thursday.