Ecclestone faces £1.2bn tax dodge claim

Formula 1 boss Bernie Ecclestone avoided a potential £1.2bn tax bill after reaching a settlement deal with HMRC, according to a new BBC Panorama probe.

The BBC obtained legal transcripts which revealed HMRC spent nine years investigating Ecclestone’s family tax affairs before offering to settle for just £10m in 2008.

The investigation goes back to 1995 when Ecclestone secured ownership of the TV rights of Formula 1, and then moved the asset offshore before giving the rights to his then wife, Slavica. She transferred them to a family trust in Liechtenstein before selling them on.

The BBC said that it could be...

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Comments
BKD's picture

Why is it outrageous?    2 thanks

BKD | | Permalink

What part of "negotiated settlement" - something that is available to "ordinary" taxpayers as well as those at the other end of the scale - do you not understand? Settlements are agreed every day - it's just that the larger celebrity cases are the ones considered to be newsworthy.

BKD's picture

Where ...    2 thanks

BKD | | Permalink

... is the abuse and offence? My point is quite genuine, and there is nothing to debate - Bernie's settlement is little different to that agreed with any "ordinary" taxpayer - it is only the scale and identity of the taxpayer that makes it seemingly reportable. I have recently negotiated an EBT settlement on behalf of an "ordinary" taxpayer, resulting in payment of a liability that was a fraction of what HMRC were seeking. Should I report that to the Daily Mail so that they can bleat on about the immorality and corruption at HMRC?

BTW - ...

Missing the point..    1 thanks

Tromdo | | Permalink

Commenters are assuming that HMRC knew about the offshore trusts & thus were fully aware of all the circumstances.

memyself-eye's picture

HMRC    3 thanks

memyself-eye | | Permalink

spent nine years investigating and possibly did not know about the trust?

Hmmm..

I saw no offence in BKD's post.

stepurhan's picture

Non-story    7 thanks

stepurhan | | Permalink

"Potential" tax bill of £1.2 billion "if" he could be shown to have had involvement in the funds.

So not an actual tax liability of £1.2 billion, presumably because he could not be shown to have had involvement in the funds. An abusive tax arrangement? Seems quite likely. An illegal tax arrangement? Not on the basis of the facts presented. Even the BBC are describing it as "legally watertight".

If they were unable to prove he had done anything wrong in tax law, HMRC getting £10 million sounds like a result. After all, it sounds like they couldn't prove he owed anything. Maybe it is time MPs stopped bleating about this sort of thing and actually started genuinely simplifying tax law to avoid this sort of thing being possible.

So in summary    3 thanks

Martin B | | Permalink

He gave the rights to his wife and .... has no involvement! and saved over a billion pounds in tax. Do you think he talks to his wife about it or has influence over her?

How does the concept of 'shadow director' fit in?

Big puzzle to me.

 

 

Paul Scholes's picture

Going with my gut....    4 thanks

Paul Scholes | | Permalink

my "outrage", whilst watching Panorama, was how we have built a society where this nasty little man's raison d'etre could ever have be seen as acceptable.  

I found myself wishing that someone had put supa-glue on those revolving doors so that he was destined to walk around in circles for the rest of his life.

Then, with my accountant's hat on, I was left wondering why did the bribes and other payments get half paid by the trust over which he had no influence?

 

andy_north's picture

£10m

andy_north | | Permalink

I may have misheard but I'm sure there was a quote on the news that they earn £10m in interest in 6 weeks!

Degree of sympathy

exceljockey | | Permalink

I am not a rich man and have little hope of ever dealing in the sums mentioned in this case. However if I did have that kind of money I would do everything legally possible to reduce my exposure to taxes. I don't buy this 'moral obligation' argument to pay more tax than I am legally expected to pay.

If the man has done something illegal then try him in a court of law and then imprison him. If his case is 'legally watertight', leave him alone. The failure here is not in the man's morals but in the ability of the govt/HMRC to ensure suitable laws are in place to prevent this kind of thing happening. I know there are grey areas which are open to interpretation by HMRC and the courts and sometimes the tax payer wins and sometimes he loses. If you want to inhabit the world of grey areas thats fine, but don't cry if you get caught. If its grey, stay away!!

'Legally watertight' doesn't sound like a grey area to me so leave Bernie alone.

stepurhan's picture

It doesn't    1 thanks

stepurhan | | Permalink

Martin B wrote:
How does the concept of 'shadow director' fit in?

Big puzzle to me.

Trusts not companies, so no concept of shadow director to fit in. Is there an equivalent for trusts? Not that I'm aware of. Should there be? Probably if it allows abusive tax arrangements to be perfectly legal.

I can't help thinking that, with 9 years of investigation, this is an angle HMRC would have taken at some point if it had any legal bite. The fact that they didn't implies that it doesn't. Whether that is because you can't have "shadow" anything in this context, or they simply could not demonstrate Bernie was one is something we can only speculate on. Who is responsible for the overly complex tax law we currently have that makes complex tax avoidance schemes possible?

slipknot08's picture

as usual, only half the story makes it into the media soundbite.    4 thanks

slipknot08 | | Permalink
  • Husband/wife nil gain/nil loss transfer - perfectly acceptable to everyone - plain vanilla planning?
  • Wife settles offshore trusts - again, reasonable and well known planning?
  • Trustees make sale and realise funds free of CGT
  • In the meantime, the couple divorce (presumably more to do with alleged orgies than tax planning reasons)
  • The funds in trust are assessed as part of wife's resource, and she ends up having to make payments to ex-husband, which come from the trust, and then the bit no-one mentions...
  • He is presumably charged to tax on the amounts received from his ex-wife, which have been funded from the trust.

Obviously a lot more complex than that, and domicile, residence etc of parties to be taken into account, but where is the egregious avoidance here? The character of the taxpayer should not enter into this discussion - he has on the face of it, done nothing terrible here (whatever else he may have done or not done), nor is it complex and 'sophisticated' (other than the sums involved), and it involves actual life events, rather than pure 'planning'... As Jolyon Maugham said on the news, unless he settled the funds, or was within the class of beneficiaries, this appears legally watertight.

Not weveryone rich is an awful person just because they have money - there may be other reasons why they are, but that is a different discussion!

slipknot08's picture

$:£

slipknot08 | | Permalink

BBC had it at $2bn = £1.2bn - don't know who is right...

Retrospection    2 thanks

howardwalters | | Permalink

The solution is simple - HMRC get parliament to change the law retrospectively and turn what was legally watertight at the time into something that effectively wasn't. Then collect the £1.2m.

Retrospection...    1 thanks

James26 | | Permalink

...like that would work particularly for something that was nearly 20 years ago.  That would just make the lawyers richer as it would be tied up in the courts forever and ever.  The government would probably lose and meanwhile everyone we want to invest in this country would have gone somewhere else.

The law has changed since the 90s so this is harder to do because laws have been passed by politicians to close these down.  Of course some tax payer is always going to be ahead, but there actually seems to be a number of schemes recently that have failed so maybe some of the tide is turning somewhat.

 

I was being flippant but

howardwalters | | Permalink

they have just retrospectively changed the law for something that is 10 years old (the DOTAS regime), so what's another 10 years between friends?

Shadow directors    1 thanks

hiu612 | | Permalink

Isn't the normal risk with a trust that if the settlor or beneficiaries are controlling the trustees decisions to the extent that the trustees are little more than puppets, then the trust is set aside as a sham and the legal structure is looked through in a similar way to IR35 looking through the veil of incorporation?

More distortion of the issues    2 thanks

AndyC555 | | Permalink

You may as well run a story that Bill Gates faces a multi-billion dollar tax bill if he is found to be UK tax resident.

And that's the point.  It's all very well to run stories highlighting the massive tax bills that MIGHT arise if something that happened hadn't or something that hadn't happened had but that ignores the very point of tax planning within the law. 

If I won £100m on the lottery and decided to move to Dubai so future interest on it could accrue tax free it would not be "outrageous underhand sneaky tax planning using loopholes".  It would be the law and no amount of screeching and wailing by Panorama would change that.

If I instead PRETENDED to move to Dubai then it would be fraud and something worth investigating.

IF Ecclestone continued to control the trust then THAT would be the issue but the general impression that the public have come away with is that Ecclestone would have HAD to pay £1.2bn in tax had it not been for the £10m deal with HMRC.

Once again the tax 'truth' is buried under innuendo and misunderstanding.  

 

              
 

 

 

 

Seems odd to me    1 thanks

pengles | | Permalink
If Bernie's tax affairs were "legally watertight" why pay out £29m in blackmail??  
   
   

Flippant

James26 | | Permalink

I appreciated it probably was... guess who will be rubbing their hands over the DOTAS changes... and taking money directly from people's bank accounts... maybe we are in the wrong profession :-). 

You can't see the past schemes paying over a penny until there has been a raft of court cases over whether the legislation is valid... not to mention the counter claims re unjust enrichment of the government.  While we don't quite have the concept of punitive damages I can see that there will be some level of damages that have to be paid where a scheme is upheld to actually work and HMRC has wrongly taken someone's money.

Hopefully this will eventually be done more sensibly.  You don't have to pay over the tax to HMRC if you have a scheme under DOTAS but if you don't then the penalty regime will apply and be much more harsh if the scheme fails.  E.g. if you don't pay over tax at stake then you risk a 100% penalty but if you do then there will be 0% penalty.  That would seem easier to get through than some of the hair brained proposals that seem to be flying around at the moment.

Penalty

howardwalters | | Permalink

Why should there be any penalty? I'm of the view that we should be able to rely on the law as it existed at the time events took place regardless of whether there were unintended consequences or the law was badly written. If the lawmakers can retrospectively move the goalposts when the score doesn't suit them (I've been watching the Champions League!) then we really are on a slippery slope.

this is about trust law and    1 thanks

carlh | | Permalink

this is about trust law and not tax law.

trusts are not DOTAS schemes.

you cannot on a whim change trust law like with tax law it would take years/decades if at all, and then it would have far more implications on our society than most of you know, it is ingrained in everything.

also any changes made to trust law you can retrospectively backdate them 100 years to compensate for any changes made.  

I am not a fan of little Bernie but he stayed within the law and paid what was due and I know most of that he saved would have been invested into businesses that employ people. 

 

TABLOID NEWS MAKING AT ITS BEST YET AGAIN! 

It doesn't matter what law.

howardwalters | | Permalink

 It could be trust law, tax law, criminal law or the law of averages for that matter - everyone should still be able to rely on it.

Are 'schemes' dead?

AndyC555 | | Permalink

In today's climate (both legal and public opinion) I can't help thinking that tax 'schemes' are dead.

Mind you, the firm I work in has been looking a some very interesting tax 'structures'. 

Paul Scholes's picture

If not dead, redundant

Paul Scholes | | Permalink

The FT reported a few months back that the number of reported schemes was at an all time low, and I also remember reading that the resources put to developing such schemes in large firms has been significantly pulled back.

The arguments about ethical business and finances versus legal greed & inequality rage on but I have always been more comfortable using my skills & experience to help clients increase their income & profits, the major part of which they keep, that finding a dodge to reduce their tax bill.

Just to declare a vested interest, I've just received my first free prescription from the chemist and so need you lot, and your clients, to pay their tax.