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Taxman takes on Take That in avoidance clampdown

HM Revenue & Customs is trying to close down a tax scheme in which members of the pop band Take That invested at least £26 million, according to The Times.

 
Taxman takes on Take That in avoidance clampdown

HM Revenue & Customs (HMRC) is trying to close down an investment scheme in which members of the pop band Take That invested at least £26 million, according to The Times.

Gary Barlow (pictured), Howard Donald and Take That manager Jonathan Wild invested in the scheme, run by a company called Icebreaker Management Services. They are among 1,000 investors who have contributed £480 million to 62 partnerships in music industry investment schemes.

HMRC will try to close the partnerships' structure at a tax tribunal in November, according to the paper. 'We have taken firm action to protect the Exchequer from unacceptable tax loss,' a HMRC spokesman told The Times.

'We do not accept that the Icebreaker tax avoidance schemes have the tax effects their promoters claim.'

Icebreaker denied the partnerships were designed to avoid tax. 'Icebreaker LLPs are all commercial businesses in which the LLP members work actively together in order to produce creative and artistic material and create taxable profits,' a lawyer for the firm told the paper.

The new follows HMRC's announcement that it was investigating a further tax scheme, Jersey-based K2,  reportedly used by TV comedian Jimmy Carr (pictured below) to shelter £3.3 million.

According to The Times over 1,000 people used the scheme, expecting to pay as little as 1.25% tax on their earnings. K2 is understood to have helped people avoid £168 million in tax.

HMRC said: ‘This scheme, K2, was already under investigation by HMRC. If, as is alleged, it depends on the use of loans it will not work. HMRC are looking into this. If the scheme does work technically, HMRC will challenge it in every way available to them. Government does not intend anyone, no matter who they are, to get away with paying less than they should.'

According to The Times K2 works in three stages. First a person becomes an employee of K2, then their original employer pays their salary to K2 which pays the member a minimum wage and loans them the balance through a Jersey-based trust. As the loan, which could technically be recalled, is not taxable the member only pays tax on the minimum wage.

Miles Dean, founder of Milestone International Tax Partners said: ‘I do not know how a scheme like this could work for an entertainer from a UK tax point of view. Under revenue rules income earned as a performer or sportsperson is derived by virtue of them being that person. It cannot be circumvented via a corporate structure. I expect the revenue could have a field day on this.'

16 comments so far. Why not have your say?

andrew

Jun 20, 2012 at 13:11

Good! I have no problem with tax avoidance using existing tax law on Ltd companies for example but schemes specifically designed to aviod tax are shameful.

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PAYE taxpayer

Jun 20, 2012 at 13:45

The ordinarty Brit should rejoice and HMRC should take these "celebrities" for their full tax at 50%. If not, HMRC should be sacked as they have lost the country £billions/ trillions already. With even slimy, corrupt Civl Servants avoiding tax left, right and centre, there are fewer and fewer of us PAYE carrying the entire tax burden for the nation. And we are fed up with being bled to death so that the "National Treasures" can keep their treasures.

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Anonymous 1 needed this 'off the record'

Jun 20, 2012 at 14:06

mr g barlow received an honour recentley. Should he not do the decent thing and denounce these tax avoidance schemes and pay his dues like every other honest member of the British public.Or perhaps he would like to pass on a few tax avoidance tips to liz and phil !!!

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J Thomas

Jun 20, 2012 at 15:00

I fully agree, while I believe strongly in free enterprise and capitalism I have absolutely no respect for these charlatans. Tax avoidance/evasion is simply theft, these celebrities enjoy living in our Country where ordinary taxpayers work and pay tax to fund defence, the Police, infrastructure, and countless other benefits so they can go about their lives unperturbed.

The irony is many are trendy lefties, under the Bolshevics they would have been put up against a brick wall and shot.

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Clive B

Jun 20, 2012 at 16:17

J Thomas

"Tax avoidance/evasion is simply theft"

Tax avoidance is 100% legal. Do you have an ISA ? Pay into a pension ? Gift Aid money to charity ? All reduce tax (hence avoiding it), all completely legal as intended by the government and HMRC.

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andrew

Jun 20, 2012 at 16:31

Clive, I don't think anyone is referring to avoidance in the terms you suggest. The schemes you are referring to are all designed to encourage a behaviour, to save for example, or give to help others.

The kind of avoidance that sticks in my craw are those schemes who's sole purpose is to reduce tax payment, in particular for those who are well able to meet their tax burden.

It is somewhat ironic that people such as those referred to in this article are beating the drum for charity donations from the great unwashed and at the same time making every effort to minimise the amount of tax they pay through such schemes.

Sickening hipocracy.

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Tricky

Jun 20, 2012 at 19:40

We all practice tax avoidance on a daily basis - do we fly or go by train? Favour one non vatable type of food over another, choose a tradesman who is (legitimately) not VAT registered over one who is? Of course we do, and we should not be chastised for so doing. That said I do not agree that the average working man on PAYE should be forced to pay tax while others avoid it to this degree.

The problem is that our tax laws are so complex and poorly conceived that loopholes are possible and inevitable. The tax system should be radically simplified to make it completely clear what is legal and what is not and therefore leave no room for this type of behaviour.

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Nemesis

Jun 20, 2012 at 19:45

yes Clive has got it very wrong. There is a big difference between something set up by parliament (Isa, pensions, gift aid) and tax avoidance which tries to bypass parliament's tax laws.

What I do not understand is why HMRC has not done something about it before. They know how much an average taxi driver in London should earn and roughly how much a top comedian should earn. A tax return with £10k income for a high earning TV star should have triggered a major investigation.

It seems the HMRC find the middle class an easier tax investigation target as they cannot afford the legal fees to defend an investigation.

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Roger Savage

Jun 20, 2012 at 19:49

I wonder when HMRC will be going after crime syndicates, drug dealers and 'travelling people' for tax avoidance... Oh that might be too difficult.

I wonder when HMRC will be going after the businesses whose execs that senior HMRC employees have had cosy dinners with and agreed to write down their tax liabilities. Oh, that wouldn't do, would it?

I genuinely used to abhor people who didn't pay 'their share' of tax (what even is a fair share - should somebody single pay little and large families pay heaps, for example, as they use many public services?)

But when you think about it a bit more, hardworking people are been taken for mugs, not by Jimmy Carr, but by those who never even get off their backsides to work, or come to this country to sponge off the state. I'd also throw in prisoners who get a fortune spent on them and do nothing in return (e.g. chain gangs, fixing the roads, etc...) and the 'vulnerable' and 'underprivileged' - i.e. people who will never be any good yet have a fortune spent on them in the paper thin hope they'll turn out as 'good eggs'. Let's also not forget the burgeoning public sector and how much that costs to keep the mostly useless staff in pensions and jobs.

Under these circumstances, who are really the mugs? Jimmy Carr & Co? The spongers? The council non-jobbers? Or the drones that go to work every day for 50-odd years only to find that once their tired bodies reach retirement they have to fund all their own care (because they didn't waste all their money) and watch all the freeloaders that did the 'take, take, take' routine get free treatment, etc...

Do all the people that have commented so far have anything to say about the government officials who also use tax avoidance schemes? I can just imagine that Cameron and Osborne (and Blair, Brown and Darling) before them have paid every single penny they were due over the years...

[Massive ahem...]

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xxxxx

Jun 20, 2012 at 19:49

Couldn't agree more with andrew. Absolutely right. These people deliberately set out to have complex arrangements for their financial affairs that have no other purpose than to avoid paying tax and in some cases almost no tax at all on £millions of income. And yet they want all of the benefits of living in the UK. One way around all of this is to have a minimum rate of tax - on all of your income from whatever source you must have paid at least 20% in totalno matter what arrangements you have entered into to avoid tax.

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andrew

Jun 20, 2012 at 20:15

Roger, that is a whole other can or worms!

I have to agree that the situation of people working for the civil service who operate as employees of their own Ltd company is a complete nonesense and should be canned immediately, the same goes for the BBC.

Anyone in the real world would be hit with an IR35 claim if they operated in the same way. These people are employees in everything other than name and if the government departments can't operate above board there is little hope.

For what it is worth I am in agreement with 5x in that a flat rate of tax for all (perhaps keeping the nil rate tax band at £10,000) is the best solution. Nice and simple and little point or opportunity to avoid it. I believe it has also been proven to generate more tax revenue overall than our current system.

Not likey to ever happen of course because our guttless politicians don't have it in them.

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GrahamR

Jun 20, 2012 at 20:37

The “asset” is the “goodwill” being JC’s performing rights and ability to generate revenues (goodwill). I do not understand why this series of transactions is not caught by ss 739-740 ICTA 1988 (accepting that is now embodied in ITA 2007). Secondly, why doesn’t CFC legislation cause the income flow from UK to the Jersey entity to be taxed at UK CT marginal rates (as clearly JC would be exerting some element of “control”) ? Answers on any postcard, to St Helier Post Office.

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chris Townson

Jun 21, 2012 at 05:59

As one reader suggested ,what is more simple than feeding into the computer the "top" people in every major work category and seeing how much tax is being paid.Then go to town on the obvious fraudsters and jail the guilty as a deterrent or better still ball and chain to clean up the rubbish as in some of the US States.

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Alan Tonks

Jun 21, 2012 at 12:10

Well said Roger, I couldn't agree more.

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martin smiler

Jun 21, 2012 at 12:38

could be the biggest clanger by DC yet hope the press get stuck into all the tories and top earners tax avoiding scams guess mr carr will also get stuck into the cons aswell as for roger comments you are spot on

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stuart cotton

Jun 28, 2014 at 11:12

I have been investigating numerous issues around Icebreaker investments for over four years and have many clients in complete disbelief over what has happened to their funds. There is much more to this than just the Tax Treatment and the Tribunal decision and we have been developing strategies throughout the process to assist those who are affected.

There was some aggressive selling of this as a pure Tax avoidance scheme but the vast majority of investors were convinced that they were taking part in a fully commercial venture that happened to have a tax advantage. Some members put in far more time than was required, under the Relief rules, in order to further commercialise the Intellectual Properties owned and are incredulous that their efforts have not been recognised. The tribunal was all about defending the scheme not the individual partnerships and Investors now need a new direction if they are to limit the damage'

We have been developing a wide range of strategies, based on factual scenarios and key intelligence obtained, in order to reverse several aspects that were lost. Details can be found at www.investor-rescue.org and www.doppler-intelligence.com

Investors in Icebreaker and others like it (Future / Eclipse, Film schemes, Fine Wines etc) need strategic support on a number of levels and I would like to speak with anyone affected, in any way.

Stuart Cotton

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