Tax avoidance schemes
By Tim Gillett Saffery Champness LLP London
Even occasional readers of the national press will not have failed to notice the acres of coverage given to tax avoidance.
Barely a week passes before there is reference again to celebrity A or celebrity B, including sports stars and personalities, accused of breaking the “moral code” by having sought to minimise his or her tax liabilities through participation in tax avoidance schemes, that were once generally perceived as acceptable financial planning.
For many years, the case of the Eclipse 35 Film Partnership (Eclipse), whose members include many high profile individuals in the sporting world, such as Sven-Goran Eriksson, the former England National Football Team Manager, and Sir Alex Ferguson, the former Manager of Manchester United FC, moved slowly upwards through the judicial system, culminating in an English Appeal Court ruling in 2016 that the ‘planning’ does not work, as the partnership was not commercially trading with a view to profit. Consequently, the anticipated tax reliefs were denied.
HMRC has then subsequently sought to recover the tax advantage through the use of their extensive follower notice and accelerated payment notice (“APN”) powers.
Most would think that this would then be an end to the matter, but there continue to be various challenges against the validity of the notices issued by HMRC and, no doubt, their progress through the judicial system will continue for some time to come.
In the current environment, where Tribunals and Courts seem increasingly to be finding in favour of the tax authorities, the prospects for taxpayers’ success would appear to be limited.
The lack of certainty as to the final outcome continues to be a significant threat hanging over those Eclipse investors who are still under HMRC enquiry. Will they be faced with, perhaps, crippling tax and interest claims? Or will a more palatable settlement opportunity be offered to them?
Alongside the ongoing tax discussions, there are various action groups, which have been set up to seek redress from those involved in, for example, the design, promotion, implementation and funding of the Eclipse strategy. Here again, the process is likely to be drawn out and costly but, in the event of a successful outcome for the investor, it may provide a means to assist in settling the financial liabilities to HMRC following any final settlement.
It remains to be seen what the final resolution will be, but one thing is absolutely certain – aggressive tax avoidance has rapidly gone the way of drink-driving in being socially unacceptable in 2017!