Thursday, 5 November 2015

Tax Avoidance (05/05/14)

The tax avoidance exploits of the Formula 1 motor racing boss, Bernie Ecclestone, will attract a lot of adverse comment and rightly so, because wealthy people who move their money abroad or into complicated trusts often get away with murder when it comes to paying their dues.

But the real problem is that it's so very common - lots of people are at it and have been hard at work avoiding paying tax for years and not just horrible little men like Bernie Ecclestone.

Rangers Football Club went bust after a blatant scam in which they helped many of their star players avoid paying any tax - and the Manchester United manager, Sir Alex Ferguson, was in the news recently as one of a group of wealthy investors involved in a scheme which would have cost the Inland Revenue £117 million in tax relief.

Funny how people who have so much feel that they should pay so little when it comes to their personal wealth. 

F1's Ecclestone avoided potential £1.2bn tax bill
By Darragh MacIntyre

BBC Panorama

Bernie Ecclestone has been at the helm of Formula 1 for almost 40 years

Formula 1 boss Bernie Ecclestone has avoided a potential £1.2bn tax bill as a result of a secret deal with HMRC.

The deal involved a payment of just £10m, according to legal transcripts obtained by BBC Panorama.

Revenue & Customs spent nine years investigating the Ecclestone family's tax affairs before offering to settle in return for the payment from the family trusts in 2008.

Mr Ecclestone said he paid more than £50m in tax last year.

Mr Ecclestone, the chief executive of Formula 1, is currently on trial in Germany facing corruption charges. It is alleged he was behind a £26m bribe paid to a bank official.

Prosecutors allege the bribe was paid to ensure that Mr Ecclestone retained control of the sport.

Ecclestone admits paying former banker, Gerhard Gribkowsky, but says he was effectively the victim of blackmail as he was worried the banker would tell the tax authorities he had set up an offshore family trust.
The bribery trial of Bernie Ecclestone, seen here with his lawyers, began in Munich last week

Panorama's investigation goes back to 1995 when Mr Ecclestone secured ownership of the lucrative TV rights of Formula 1.

Shortly afterwards he moved this prize asset offshore, giving the rights to his then wife, Slavica.

She transferred them to a family trust in Liechtenstein, before selling them for a huge profit, free of UK tax.

It may be the biggest individual tax dodge in British history, and is legally watertight provided Mr Ecclestone did not set up, or control, the trust.

If he had done, Mr Ecclestone has admitted, he could have faced a tax bill of more than $2bn - or £1.2bn.

Barrister and tax expert Jolyon Maugham said this was a "pretty substantial" loss of tax.

"I'm certainly not aware of anything else remotely approaching that sort of magnitude, in my fairly extensive experience."

HMRC deal

UK tax authorities spent nine years investigating the Ecclestones' tax affairs before agreeing a settlement.

HMRC does not comment on individual cases, but Panorama has obtained evidence from the previously unpublished transcripts of interviews conducted by a German public prosecutor.

One of the lawyers who helped run the Ecclestone family trusts, Frederique Flournoy, told the prosecutor: "In summer 2008, the Inland Revenue offered to conclude the matter if we paid £10m. We decided to pay up."

According to Ms Flournoy's evidence, the Ecclestone family trusts earn around £10m in interest every six weeks.

Labour MP Emily Thornberry, the shadow attorney general, said: "Ten million may sound like a lot to some people but you have to look at it in the round.

"And if we're talking about a trust fund in which they are making huge amounts of money like this, then it isn't very much is it?"
Mr Ecclestone and ex-wife Slavica had two daughters - Petra and Tamara - before their divorce in 2009

Mr Ecclestone says he gave away his fortune to avoid inheritance tax laws that he considered to be "very unfair" at that time.

Having gifted the assets to his wife, Mr Ecclestone can't receive payments from his family's offshore trusts.

But Ms Flournoy told the German prosecutor he's been receiving payments from his wife since his divorce: "Mrs Ecclestone received disbursements from the Trusts. In other words, she also has a personal asset. That is also the basis on which the divorce ruling fixed the payment amounts to Ecclestone."

When asked how high the divorce payments were to Mr Ecclestone, she said: "I don't know the exact figure, however it must be around $100 million a year."

'More transparent'

Mr Ecclestone said his divorce was a "private matter". He says he has always paid his fair share of tax and that he is "proud to be British and proud to make my contribution by paying my taxes here."

Slavica Ecclestone's lawyer said her estate planning was based on legal advice and that she was entitled to privacy in her tax affairs.

A lawyer for the family trusts said Mr Ecclestone has not exerted any control over the management of the trusts. He said the transcripts from the German prosecutor contained errors.

A spokesperson for HMRC said: "The way in which HMRC settles and assures tax disputes has been completely overhauled in recent years, making the process more transparent.

"The effectiveness and propriety of such settlements is overseen by a Tax Assurance Commissioner, who publishes an annual report covering all large settlement cases."

Tax Avoidance (27 January 2014)

Why is it that people who are already extremely wealthy find it so difficult to pay their fare share of tax?

Even someone like Sir Alex Ferguson, who is wheeled out regularly to support the Labour Party, seems to favour elaborate tax avoidance schemes - according to this report from the Times newspaper.

Only this time HM Revenue & Customs won its High Court battle to stop stop wealthy investors from claiming £404,000 in tax relief - from funds worth only £173,000.  

Ferguson and Eriksson lose film tax relief battle

Sir Alex Ferguson is a member of a film investment scheme that sought £117 million in tax relief Andrew Yates/ Getty Images

By Alexi Mostrous Special Correspondent

Sven-Göran Eriksson, the former England manager, and Sir Alex Ferguson, the ex-Manchester United manager, are among hundreds of wealthy investors facing a gloomy Christmas after Revenue & Customs again defeated their claims to £117 million in tax relief.

The 289 members of Eclipse 35, a controversial film investment scheme, sought the tax relief as part of a complex £1 billion deal to license distribution rights to two Disney productions called Enchanted and Underdog.

Yesterday a High Court judge confirmed an earlier ruling that the scheme was not “a trade”, depriving its members of the possibility of claiming tax relief. If Eclipse 35 had worked, members could have enjoyed an average of £404,000 in tax relief on a personal investment of £173,000.

Mr Justice Sales agreed with tax judges last year who ruled that Eclipse 35 did not have “any capability whatsoever to be part of any strategic or day-to-day planning for the marketing or release of the two films”.

He also found that the main income streams from the films involved “no prospect of loss or gain”, an important aspect of a trade.

The Eclipse members put up £50 million of their own cash which, together with £790 million in loans from Barclays Bank, were used to buy distribution rights. Disney agreed to lease back the rights in return for an annual payment over 20 years. Members argued that tax relief was claimable on the large interest payments arising on the Barclays loan.

Last year, the Revenue signalled that it might try to tax payments coming back to investors from Disney, meaning that they could receive tax bills significantly greater than the relief they might have received.

Many corporations have distanced themselves from investment schemes such as Eclipse 35, citing an increasing intolerance of anything seen to be tax avoidance.

“If Eclipse came up again, would we help fund it?” said a source at Barclays, which financed Eclipse 35 in 2007, last July. “No.”

Last year, Dave Hartnett, the former head of the Revenue, said that his department would increase legal action against film investment schemes. “I think we’ll clean up on film schemes over the next few years,” he said.

Eclipse 35 was set up by Future Capital Partners (FCP), which received £44 million in fees. Disney was paid £6 million. FCP denies that it promotes tax avoidance schemes and says it commercial operations for profit.

An FCP spokesman said: “We are naturally disappointed as we consider that Eclipse 35 is a commercial, trading, film business, which we expect to generate at least £474 million of UK taxable net profits over its life — over one and a half times the amount of tax relief that was claimed.”