View the article online at http://citywire.co.uk/money/article/a598987
Fergie and Sven's tax plan backfires
Manchester United manager Alex Ferguson and former England manager Sven Goran Eriksson could be forced to pay more tax than they sought to avoid through an ‘aggressive’ tax scheme, as part of a HM Revenue & Customs clampdown.
Manchester United manager Alex Ferguson (pictured) and former England manager Sven Goran Eriksson could be forced to pay more tax than they sought to avoid through an ‘aggressive’ tax scheme, as part of a HM Revenue & Customs (HMRC) clampdown.
The pair are among 289 investors in film partnership scheme Eclipse 35, run by Future Capital Partners. HMRC won a tribunal case against the scheme earlier this year, in a ruling that initially was thought to have denied the investors the £117 million tax relief they sought.
Investors, including former F&C Asset Management chairman Alain Grisay, put £50 million of capital into the scheme, and borrowed £790 million from Barclays to buy the distribution rights to two Disney films, offsetting the interest charges against tax. Disney agreed to lease the rights back in return for an annual payment over 20 years.
According to reports, HMRC believes it can not only block the investors’ claim for tax relief but also demand they pay tax on the licensing payments made by Disney, leaving them with a £250 million tax bill.
The news is the latest in a series of revelations about the tax affairs of the UK’s wealthy. Olympic gold medallist Chris Hoy defended his financial arrangements after The Guardian reported that he had received a loan from his own company. The paper said it was not clear whether the move, which is legal, resulted in a reduction in tax, but quoted a lawyer claiming it could be vulnerable to attack under disguised remuneration rules.
Hoy denied the arrangement disguised remuneration, adding the loan had been repaid and that the dividends taken to pay were taxed ‘at the highest rate’.
The Mail on Sunday reported that eight of the England football squad were invested in tax schemes, some of which had been challenged by HMRC in the courts.
The Times reported that HMRC was facing a 38-year backlog as it struggled to cope with 20,000 tax tribunal cases. It said MPs would investigate loopholes in the tax system. Writing in The Times, Public Accounts Committee chairman Margaret Hodge said some of the arrangements ‘wouldn’t look out of place in a banana republic’.
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