Celebrities to lose millions as Jersey-linked tax avoidance scheme ruled out

Monday 30 October 2017

A judgement against a controversial Jersey-linked tax scheme exploited by celebrities including Michael Caine, Gary Barlow and Anne Robinson to shelter their millions, could raise as much as £325million for HM Revenue and Customs (HMRC).

The UK Upper Tribunal has now ruled against Jersey limited partnership ‘Clavis Liberty Fund LLP’, which was used as part of a scheme to reduce the tax bills of the wealthy.

Promoted to the UK’s wealthy citizens by the Mercury Tax Group, the scheme created “artificial” tax losses for members of Clavis, which they could use to offset their tax bills.

This most recent judgement on Clavis will win back £18million for HMRC, but is also expected to have implications for the hundreds of other users of controversial ‘Liberty’ schemes. Up to £325million in unpaid tax could be recovered as a result.

Pictured: Gary Barlow, lead singer and songwriter for Take That, was reported to be one of the controversial Liberty Scheme's highest contributors.

In 2014, it emerged that they were being used by around 1,600 rich individuals, including celebrities, sports stars and even convicted criminals.

Following the revelations, many were ordered to settle their tax bills before the case came before a judge, including singer Katie Melua, who repaid her share. This week’s judgement means that those who repaid their unpaid tax bills in advance will not get that money back.

Take That frontman Gary Barlow and Wham superstar George Michael were reportedly among the highest contributors to the scheme, having paid in £4.46million and £6.2million respectively. Mr Michael repaid this sum before he passed away in 2016. 

Weakest Link quizmaster Anne Robinson was also named, having allegedly invested £4million into the scheme, as was veteran Brit film star Michael Caine. 

Pictured: Iconic Italian Job actor Michael Caine was among the celebrities said to have benefited from the scheme.

The controversy also touched the world of rock, with all four of the Arctic Monkeys said to have paid fees of between £38,000 and £84,000 to hold onto between £557,000 and £1.1million.

Commenting on their triumph over the scheme, HMRC’s Director General for Customer Compliance Penny Ciniewicz said: “This is a brilliant victory that will bring in millions of pounds. We have repeatedly warned people about the financial consequences of using tax avoidance schemes. More and more people are coming forward and settling what they owe because they know the game is up. Our message is clear – steer clear of tax avoidance schemes or, like Liberty’s users, you’ll face a hefty consequence.”

John Riva, Channel Islands Head of Tax at KPMG, told Express that the judgement showed that the courts “do not look favourably on structures that have been set up solely to avoid taxation.”

He commented: “In my view, responsible tax advisers should only advise clients to enter into, or assist them to implement, transactions or arrangements on the basis that they have the necessary substance required by law, as well as having some business, commercial or any other non-tax purpose for its existence.” 

Pictured: Chief Minister Ian Gorst emphasised that Jersey would not support "aggressive tax planning schemes" in a 2012 speech.

In 2012, the Chief Minister rallied against what he deemed as “aggressive tax planning schemes to avoid UK tax”, stating that Jersey “has no wish, or need” to engage with those involved in such schemes.

Mr Riva added: “Although I support the Chief Minister’s statement of Jersey not wanting, or needing, to encourage abusive tax schemes, I think that there is much confusion as to what constitutes an abusive tax scheme. If Jersey wishes to enforce such statements, I am of the view that it needs to provide appropriate guidance and principles on what, in its view, constitutes an abusive tax scheme.  Clearly the scheme subject to this tax case was an abusive tax scheme. However, some schemes, which may be viewed to some as being abusive, are not as obvious as this one.”