Wealthy sports stars and celebrities have suffered two major tax avoidance defeats at the hands of HM Revenue & Customs (HMRC).
In the high-profile Eclipse Partnerships case, the Court of Appeal ruled for HMRC against one of Eclipse’s 31 partnerships to fund media projects.
The case involved around £635 million of tax.
At least 300 investors were involved in the partnership, including football managers Sir Alex Ferguson and Sven Goran Eriksson, soccer star Wayne Rooney, TV presenter Anne Robinson and journalist Jeremy Paxman.
Eclipse claimed the partnership Earned money from trading film rights, but HMRC argued the business model was a sham and really a tax avoidance scheme.
The court heard that wealthy investors borrowed cash to pay into the partnership. The partnership acquired rights to Disney films and leased the rights back to Disney.
Fines and surcharges
Meanwhile, the investors claimed tax relief against the interest paid on the loans.
Financial Secretary to the Treasury David Gauke said: “Eclipse ran more than 30 of these partnerships, which are an insult to hard working people who have to pay the tax they owe.
“The government is determined to bring all these tax avoiders to book and collect the tax they owe.”
As a result of the ruling, investors in Eclipse will be tax-treated as if they had never made the investments.
They will also have to pay tax penalties and interest on their incomes. Many will also have significant legal costs and loans taken out for the partnerships.
HMRC is also cracking down on investors trying to shield their income from tax with Business Premises Renovation Allowances (BPRA) on commercial property investments.
Tax demands have gone out to investors in three partnerships that used BPRA for tax avoidance.
According to reports, professional golfer Rory McIlroy is one investor in the schemes.
One investment involves the redevelopment of Stanley Dock, Liverpool, into a hotel complex.
BPRA was introduced as a relief to encourage businesses to redevelop disadvantaged areas by offering up to 100% relief on capital expenditure.
The relief started from April 2007 and ends in March 2017 for companies and April 2017 for individuals.
One partnership has warned investors to expect tax demands from HMRC.
Valhalla Private Client Services LLP told members HMRC has confirmed accelerated payment notices will go to all BPRA scheme members suspected of involvement in tax avoidance.
Any tax due must be repaid within 90 days.