The 53-year-old spent hundreds of thousands of pounds on luxury items, including a yacht, a holiday to the Bahamas, a Bentley car and some Beretta guns, instead of paying £600,000 due in tax.
A former bankrupt and former racing driver with no retail experience, Chappell bought department store chain BHS from the billionaire Sir Philip Green for £1 in March 2015.
But just a year into his ownership, the chain collapsed with the loss of 11,000 jobs and a £571m pensions black hole.
Chappell, from Blandford Forum in Dorset, was convicted of dishonestly evading his liability to pay more than £500,000 in income tax, corporation tax and VAT between January 2014 and September 2016.
In sentencing, the judge, Mr Justice Bryan, said Chappell had engaged in a “long and consistent course of conduct designed to cheat the revenue”.
Bryan told the disgraced businessman: “You are not of positive good character. Your offending occurs against a backdrop of successive bankruptcies.”
Chappell had denied three charges of cheating the public revenue, relating to his bankrupt finance company Swiss Rock Limited (SRL), but was found guilty by a jury at London’s Southwark crown court after three days of deliberation.
His lawyers had claimed he became, and remains, “utterly broke” as a result of the BHS deal, because the department store chain’s “pension problem exploded” shortly after his controversial purchase of the retailer.
In his defence, Chappell’s lawyers said the businessman would have been able to pay his taxes if BHS had not failed.
The jury heard that Chappell was “simply too busy” to properly sort out his business dealings, that he was not an accountant and had been let down by others.
During the trial, Chappell told the court that his decision to buy BHS was “a life-changing catastrophe” and he should “never have touched it with a barge poll”.
In January, Chappell was ordered to pay £9.5m into the BHS pension schemes after he failed in his appeal against a ruling by the Pensions Regulator, which also secured a £363m cash settlement with Green to rescue the schemes.
Chappell’s conviction comes exactly a year after he was banned from holding any company directorships for a decade after “abusing his responsibilities”.