Football Crazy
Now I think I'm a reasonably intelligent person, but the tax laws seem bafflingly stupid to me because it seems rather ridiculous that someone can avoid a capital gains tax of £34 million by the simple expedient of moving abroad to another country.
Because the capital gain on her original investment must have accrued over several years and any sane person would think that the people who make up these tax rules would ensure that the profit can't be taken all in one year, conveniently after someone has jumped ship and decided to move all their goods and chattels to Monaco.
Monaco move saved Arsenal director £34m
David Leppard - The Sunday Times
The north London club was sold to a US billionaire
ONE of Britain’s richest women avoided £34m tax on the sale of her stake in Arsenal football club by moving to Monaco, according to documents made public in a legal battle with her commercial “adviser”.
Lady Nina Bracewell-Smith, a former non-executive director of Arsenal, saved the capital gains tax on the £116m proceeds from selling her 15.9% stake in the club in 2011.
Alistair Barclay, a property consultant related to the billionaire Barclay brothers, claims it was he who advised her to move from London to become resident in Monaco, so avoiding the tax.
Rather than accepting the £10,000 her husband offered him for “helping” his wife, he is taking her to court, claiming she owes him £1m for advice that helped her avoid the £34m in tax. The result is that her financial affairs have been opened to public scrutiny in documents presented to the High Court.
Although such a move to Monaco is legal, it will fuel concerns over the scale of tax avoidance by the super-rich.
According to a 2012 study, more than 2,000 Britons live in the Mediterranean tax haven, at a cost of £1bn a year in lost tax to the economy.
To avoid UK tax, says HM Revenue & Customs, Britons have to meet strict rules and provide evidence they have made a “definite break” with the UK. Britons with links to Monaco include Sir Philip Green, the billionaire boss of Topshop, whose wife, Tina, is a resident, and Lord Laidlaw, a Tory donor.
Bracewell-Smith, who was born Nina Kakkar and is the daughter of an Indian diplomat, married Sir Charles Bracewell-Smith, the 4th baronet of his line, in 1996. She joined a famous dynasty of “Arsenal aristocrats” with ties to the club going back more than 50 years.
Her husband is the son of the former Arsenal director Sir Guy Bracewell- Smith, the 2nd baronet, who was on the board of the club’s directors from 1953 to 1976. His father in turn was Sir Bracewell Smith, the 1st baronet, a Conservative MP who was club chairman in 1949-62. A Tory grandee, he made his fortune in property, building the Park Lane hotel in Mayfair and owning the Ritz.
Nina Bracewell-Smith’s Arsenal shares came from his estate, which was also shared with his grandchildren. Her husband transferred his shares to her and she was made a non-executive director in 2005.
In total, she owned a 15.9% stake in the club, making her the third-largest shareholder. In 2009 The Sunday Times Rich List estimated her and her family’s fortune at £85m. She was also 44th on the UK Asian Rich List.
However, in April 2011 she sold her entire Arsenal holding to Stan Kroenke, the billionaire US businessman, making him the football club’s majority shareholder.
Despite her abrupt departure from the club’s board, she was made honorary vice- president of the club in 2012.
Last year, however, she revealed she had “deep regrets” over the sale that allowed Kroenke to take control of the club. She had previously claimed he did not have the club’s best interests at heart.
The court papers allege that Bracewell-Smith had originally been advised by her solicitors and accountants that she could avoid paying the £34m tax by staying in the UK.
It later emerged that because the transaction was made in the form of loan notes kept at the London offices of the law firm Clifford Chance she would have to pay the full £34m.
In the claim form, Barclay says he was introduced to her in 2012 through his father, whom he described as “a well-known businessman and investor”.
He said she was concerned that her liability to pay capital gains tax on the Arsenal share sale “should be mitigated by lawful means”.
Barclay claims he introduced her to officials at the Monaco embassy in London and to lawyers in Monaco.
The writ claims that “for the reasons of tax efficiency” and at his “suggestion and recommendation” she “ultimately settled in Monaco”.
ONE of Britain’s richest women avoided £34m tax on the sale of her stake in Arsenal football club by moving to Monaco, according to documents made public in a legal battle with her commercial “adviser”.
Lady Nina Bracewell-Smith, a former non-executive director of Arsenal, saved the capital gains tax on the £116m proceeds from selling her 15.9% stake in the club in 2011.
Alistair Barclay, a property consultant related to the billionaire Barclay brothers, claims it was he who advised her to move from London to become resident in Monaco, so avoiding the tax.
Rather than accepting the £10,000 her husband offered him for “helping” his wife, he is taking her to court, claiming she owes him £1m for advice that helped her avoid the £34m in tax. The result is that her financial affairs have been opened to public scrutiny in documents presented to the High Court.
Although such a move to Monaco is legal, it will fuel concerns over the scale of tax avoidance by the super-rich.
According to a 2012 study, more than 2,000 Britons live in the Mediterranean tax haven, at a cost of £1bn a year in lost tax to the economy.
To avoid UK tax, says HM Revenue & Customs, Britons have to meet strict rules and provide evidence they have made a “definite break” with the UK. Britons with links to Monaco include Sir Philip Green, the billionaire boss of Topshop, whose wife, Tina, is a resident, and Lord Laidlaw, a Tory donor.
Bracewell-Smith, who was born Nina Kakkar and is the daughter of an Indian diplomat, married Sir Charles Bracewell-Smith, the 4th baronet of his line, in 1996. She joined a famous dynasty of “Arsenal aristocrats” with ties to the club going back more than 50 years.
Her husband is the son of the former Arsenal director Sir Guy Bracewell- Smith, the 2nd baronet, who was on the board of the club’s directors from 1953 to 1976. His father in turn was Sir Bracewell Smith, the 1st baronet, a Conservative MP who was club chairman in 1949-62. A Tory grandee, he made his fortune in property, building the Park Lane hotel in Mayfair and owning the Ritz.
Nina Bracewell-Smith’s Arsenal shares came from his estate, which was also shared with his grandchildren. Her husband transferred his shares to her and she was made a non-executive director in 2005.
In total, she owned a 15.9% stake in the club, making her the third-largest shareholder. In 2009 The Sunday Times Rich List estimated her and her family’s fortune at £85m. She was also 44th on the UK Asian Rich List.
However, in April 2011 she sold her entire Arsenal holding to Stan Kroenke, the billionaire US businessman, making him the football club’s majority shareholder.
Despite her abrupt departure from the club’s board, she was made honorary vice- president of the club in 2012.
Last year, however, she revealed she had “deep regrets” over the sale that allowed Kroenke to take control of the club. She had previously claimed he did not have the club’s best interests at heart.
The court papers allege that Bracewell-Smith had originally been advised by her solicitors and accountants that she could avoid paying the £34m tax by staying in the UK.
It later emerged that because the transaction was made in the form of loan notes kept at the London offices of the law firm Clifford Chance she would have to pay the full £34m.
In the claim form, Barclay says he was introduced to her in 2012 through his father, whom he described as “a well-known businessman and investor”.
He said she was concerned that her liability to pay capital gains tax on the Arsenal share sale “should be mitigated by lawful means”.
Barclay claims he introduced her to officials at the Monaco embassy in London and to lawyers in Monaco.
The writ claims that “for the reasons of tax efficiency” and at his “suggestion and recommendation” she “ultimately settled in Monaco”.
Nina Bracewell-Smith moved to Monaco after selling her 15.9% stake in the club
“On or around June 30, 2013, the defendant received approximately £116,242,750 by way of redemption proceeds into her Monégasque bank account and in doing so saved in the region of £34m in CGT [capital gains tax],” he stated.
Last October her husband sent Barclay a cheque for £10,000 for expenses for “helping” his wife. Barclay returned the cheque and demanded a £1m fee for his assistance.
A spokesman for Bracewell- Smith said she would defend the claim robustly. “Anyone has the right to move abroad for a range of reasons and that’s what Lady Bracewell-Smith has done. However, the suggestion that her decision was made in response to taxation advice from a young and unqualified acquaintance is not supported by fact. This claim will be contested robustly,” he said.
Barclay’s solicitor, the London law firm Sidley Austin, said Barclay had not acted as an official tax adviser to Bracewell-Smith.
“It is correct that Mr Barclay has issued proceedings to recover fees owing to him by the defendant. As proceedings are ongoing he is unable to comment in detail,” the firm said.
Sir Alex faces £1m loss as tax ruse fails
Ferguson and other investors have seen a ploy involving Disney films turn into a B-movie disaster
By Nicholas Hellen
“On or around June 30, 2013, the defendant received approximately £116,242,750 by way of redemption proceeds into her Monégasque bank account and in doing so saved in the region of £34m in CGT [capital gains tax],” he stated.
Last October her husband sent Barclay a cheque for £10,000 for expenses for “helping” his wife. Barclay returned the cheque and demanded a £1m fee for his assistance.
A spokesman for Bracewell- Smith said she would defend the claim robustly. “Anyone has the right to move abroad for a range of reasons and that’s what Lady Bracewell-Smith has done. However, the suggestion that her decision was made in response to taxation advice from a young and unqualified acquaintance is not supported by fact. This claim will be contested robustly,” he said.
Barclay’s solicitor, the London law firm Sidley Austin, said Barclay had not acted as an official tax adviser to Bracewell-Smith.
“It is correct that Mr Barclay has issued proceedings to recover fees owing to him by the defendant. As proceedings are ongoing he is unable to comment in detail,” the firm said.
Tax Avoidance (19 February 2014)
The Sunday Times continues its campaign against tax avoidance in high places with this cautionary tale about Underdog - a complicated scheme involving a 'circular flow of funds' which has been successfully challenged by the taxman as it looked as though it was specifically devised for tax purposes.
Now I don't really understand the motivation of people who are already very well off trying to reduce even further their fair share of tax - and that seems to be what this is all about.
In which case the issue is not so much the headline rate of tax - 40, 45 or even 50p - but the lengths that some people will go to in an effort to avoid their tax bills to an artificially low level.
Sir Alex faces £1m loss as tax ruse fails
Ferguson and other investors have seen a ploy involving Disney films turn into a B-movie disaster
By Nicholas Hellen
The movie Underdog was used in a complex film-rights scheme (Rex Features)
SIR ALEX FERGUSON, the retired Manchester United manager, and Sven-Goran Eriksson, the former England football manager, are among nearly 300 wealthy individuals who face average losses of more than £1m each over a tax avoidance scheme that has backfired.
Under the scheme, the investors joined a partnership that bought the rights to two Hollywood movies — the Disney films Enchanted and Underdog — and enabled them to claim tax relief on the borrowing costs of the deal.
But HM Revenue & Customs (HMRC) has successfully challenged the tax avoidance vehicle, known as Eclipse 35, and an attempt to restructure it has so far failed. The result is that investors may face tax bills that could be more than seven times greater than their initial investment.
The £1bn vehicle is one of 40 such schemes that attracted celebrities, financiers and businessmen. Investors hoped that, after HMRC successfully challenged Eclipse 35, Barclays would agree to restructure the deal to reduce the personal liabilities of investors.
SIR ALEX FERGUSON, the retired Manchester United manager, and Sven-Goran Eriksson, the former England football manager, are among nearly 300 wealthy individuals who face average losses of more than £1m each over a tax avoidance scheme that has backfired.
Under the scheme, the investors joined a partnership that bought the rights to two Hollywood movies — the Disney films Enchanted and Underdog — and enabled them to claim tax relief on the borrowing costs of the deal.
But HM Revenue & Customs (HMRC) has successfully challenged the tax avoidance vehicle, known as Eclipse 35, and an attempt to restructure it has so far failed. The result is that investors may face tax bills that could be more than seven times greater than their initial investment.
The £1bn vehicle is one of 40 such schemes that attracted celebrities, financiers and businessmen. Investors hoped that, after HMRC successfully challenged Eclipse 35, Barclays would agree to restructure the deal to reduce the personal liabilities of investors.
Sir Alex Ferguson faces potential liabilities many times his initial investment (Rex Features)The Sunday Times has established the bank has so far refused to do so, so 289 investors — including Ferguson and Eriksson — are now facing potential liabilities many times the size of their initial investments.
Hundreds of wealthy investors in similar schemes are now likely to be pursued by the HMRC.
Eclipse 35 was promoted by Future Capital Partners, an investment firm in Mayfair, central London, and first used in 2006. It was a contorted but potentially lucrative money trail.
The partnership bought worldwide distribution rights to the two films from Disney for £503m. It then relicensed those rights back to Disney for £1.02bn, payable over 20 years. The deal was funded with £50m from investors and £790m in loans from Barclays. Eclipse made a payment to Barclays on the loan of £293m, for which it claims tax relief of £117m.
It looked complicated, but in essence it was a circular flow of funds that created an upfront interest payment on which the investors could claim tax relief. To the taxman, it looked as if it was primarily devised for tax purposes.
Tim Levy, the founder of Future Capital Partners, told a tax tribunal scrutinising Eclipse 35 in 2011: “Tax was important, there is no question about that, but I genuinely believe that these investors were motivated significantly by the nature of the films that were being offered.”
Hundreds of wealthy investors in similar schemes are now likely to be pursued by the HMRC.
Eclipse 35 was promoted by Future Capital Partners, an investment firm in Mayfair, central London, and first used in 2006. It was a contorted but potentially lucrative money trail.
The partnership bought worldwide distribution rights to the two films from Disney for £503m. It then relicensed those rights back to Disney for £1.02bn, payable over 20 years. The deal was funded with £50m from investors and £790m in loans from Barclays. Eclipse made a payment to Barclays on the loan of £293m, for which it claims tax relief of £117m.
It looked complicated, but in essence it was a circular flow of funds that created an upfront interest payment on which the investors could claim tax relief. To the taxman, it looked as if it was primarily devised for tax purposes.
Tim Levy, the founder of Future Capital Partners, told a tax tribunal scrutinising Eclipse 35 in 2011: “Tax was important, there is no question about that, but I genuinely believe that these investors were motivated significantly by the nature of the films that were being offered.”
The Disney film Enchanted was a hit with critics and audiences (Kobal Collection)In April 2012, the tax tribunal upheld HMRC’s challenge. An appeal was dismissed last December, so revenue received by Eclipse 35 cannot be written off against tax.
Worse for the investors, it potentially meant they would be personally liable for income tax on money received by Eclipse 35 which is used to pay off the loan.
An analysis by Pannone, the legal firm, states: “This leads to a disastrous outcome where investors must pay not only their own tax, which they sought to shelter in the scheme, but also tax on ‘income’ they have never received.This could be financially devastating for many.”
The investors had hoped for a getout. They considered that by transferring the Barclays loans to another entity, they could avoid personal tax liabilities on the income.
But last week Levy informed them that Barclays had not agreed to transfer the loans. It is likely other schemes will face the same problem. In an email on Tuesday, Levy wrote: “Neither of the lending banks in the Eclipse Partnerships, being Barclays Bank and Bank of Ireland will currently novate [transfer] the loans entered into by individual members of the Eclipse Partnerships.”
Rebus Investment Solutions, a claims management firm representing 28 Eclipse 35 investors, has estimated the losses could be seven times their initial outlay. It says an average member who invested £173,000, will face a potential total cost of £1.266m in tax and interest.
Many of Rebus’s clients invested more modest sums and those who invested twice the average stake could face a cost of £2.5m.
Rebus said it represented 79 disgruntled investors in 19 other Eclipse partnerships, which have different structures. It wrote to these clients on February 5, warning that they stand to owe around £390,000 for every £60,000 they contributed in cash.
An HMRC spokesman said: “One of the many drawbacks with putting money into avoidance schemes is that you can end up owing a lot more than if you had played by the rules. If it sounds too good to be true, it is.”
Barclays said: “Barcays will not participate in transactions or schemes which have a tax avoidance purpose that does not meet our tax principles.” The exact sums invested by Ferguson and Eriksson are not known. They did not respond to requests for comment.
Worse for the investors, it potentially meant they would be personally liable for income tax on money received by Eclipse 35 which is used to pay off the loan.
An analysis by Pannone, the legal firm, states: “This leads to a disastrous outcome where investors must pay not only their own tax, which they sought to shelter in the scheme, but also tax on ‘income’ they have never received.This could be financially devastating for many.”
The investors had hoped for a getout. They considered that by transferring the Barclays loans to another entity, they could avoid personal tax liabilities on the income.
But last week Levy informed them that Barclays had not agreed to transfer the loans. It is likely other schemes will face the same problem. In an email on Tuesday, Levy wrote: “Neither of the lending banks in the Eclipse Partnerships, being Barclays Bank and Bank of Ireland will currently novate [transfer] the loans entered into by individual members of the Eclipse Partnerships.”
Rebus Investment Solutions, a claims management firm representing 28 Eclipse 35 investors, has estimated the losses could be seven times their initial outlay. It says an average member who invested £173,000, will face a potential total cost of £1.266m in tax and interest.
Many of Rebus’s clients invested more modest sums and those who invested twice the average stake could face a cost of £2.5m.
Rebus said it represented 79 disgruntled investors in 19 other Eclipse partnerships, which have different structures. It wrote to these clients on February 5, warning that they stand to owe around £390,000 for every £60,000 they contributed in cash.
An HMRC spokesman said: “One of the many drawbacks with putting money into avoidance schemes is that you can end up owing a lot more than if you had played by the rules. If it sounds too good to be true, it is.”
Barclays said: “Barcays will not participate in transactions or schemes which have a tax avoidance purpose that does not meet our tax principles.” The exact sums invested by Ferguson and Eriksson are not known. They did not respond to requests for comment.
Sven-Goran Eriksson was among the 289 investors in the film scheme (Dave Pinegar)
