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Hundreds of celebrities face huge tax bills after being ordered to repay up to 20 times their investment in an avoidance scheme

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Hundreds of celebrities could face 'financial ruin' after the taxman ordered them to repay up to 20 times of what they invested in a massive avoidance scheme. 780 investors spread across 39 partnerships poured £2.2b into film investment schemes to exploit industry tax breaks. One adviser claimed as many as 700 of the 780 involved could go bankrupt. Daily mail

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Why the 20x multiplier of what they put in? I understand the back tax and fine, but 20 times more than the amount of money invested doesn't match my understanding of the normal penalties for tax evasion. E.g.

https://www.kinsellatax.co.uk/tax-investigation-advice-and-services/hmrc-tax-investigation-penalties/

Quote

Investigation penalties can be anything up to 200% of the tax due.

To get to 20 times more than invested, the return on that investment would need to be something like 1000%, which seems unlikely. Also, had it been that much, the stories of likely bankruptcies don't make sense since they'd all still be well ahead.

Sounds like typical Daily Wail half baked rumours to me.

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4 minutes ago, TheBlueCat said:

Why the 20x multiplier of what they put in? I understand the back tax and fine, but 20 times more than the amount of money invested doesn't match my understanding of the normal penalties for tax evasion. E.g.

https://www.kinsellatax.co.uk/tax-investigation-advice-and-services/hmrc-tax-investigation-penalties/

To get to 20 times more than invested, the return on that investment would need to be something like 1000%, which seems unlikely. Also, had it been that much, the stories of likely bankruptcies don't make sense since they'd all still be well ahead.

Sounds like typical Daily Wail half baked rumours to me.

FT repeats the 600-700 going bankrupt claim.  Eclipse 35's advisor exaggerating thing a little?  Btw, DM's graph didn't make any sense to me at all.  Slightly easier to follow explanation is here:

https://www.moneymarketing.co.uk/hmrc-wins-landmark-film-scheme-tax-case/

 

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The 20x figure is in the Times today too.

Basically this was a highly leveraged scheme where you paid in say £50k in order to generate a £1m loan in order to (clubbing together with others) buy the rights to a film. The income from the film would pay off the loan over twenty years, but in the meantime the interest on the loan could be offset against your tax elsewhere. So your £50k would get you say £100k tax offset every year. HMRC argued it was just a scheme for generating tax offsets and are clawing that back for the years it has been operational. Additionally investors are now also liable for tax on income from the films, even though they won't see this as it goes to paying off the loan.

The people who won't be paying back are HSBC who designed this particular scheme and pocketed £8m in fees, the marketing company who got £44m, or the many accountants who recommended it (for a fee).

At least that's how I understand it from the report. It's fiendishly complicated, which is what I guess they were counting on.

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They must mean go bankrupt again.

Celebrities and bankruptcy seem to go go hand in hand.  It's a massive scam in itself - on a par with builder and other business bankruptcies.

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27 minutes ago, frederico said:

Hmm , the hatred of celebrities and wealth is beginning to come out of the woodwork. I hope Mrs May actually does something soon or its going to get nasty.

Of course, they could have just paid their taxes like most of the rest of the citizens in the society where they live.

It is not as though most of them are short of a bob or two.,

They are as much free riders as any benefit fiddler and at least the latter are not on the TV all the time telling use how to feel, think and vote.

 

Edited by stormymonday_2011

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40 minutes ago, satch said:

You mean the luvvies like .....

Despite her partner Martin Freeman’s fortune – most of it accumulated after landing the role of Bilbo Baggins in the three Hobbit films – Miss Abbington will have to pay off only a fraction of her debt.

A source told The Sun: ‘Amanda has done nothing legally wrong, but I am sure Revenue & Customs officials will be fuming on missing out on her cash (£120,000 unpaid tax), especially given her common-law husband is a very successful actor.

They refer to each other as husband and wife and live in a £900,000 house in Potters Bar, Hertfordshire.

Miss Abbington’s bankruptcy declaration comes only a few weeks after that of 36-year-old former EastEnders star Martine McCutcheon, with debts of £187,000.

 

Martin Freedman us a big Labour party supporter, as is tax dodger Alex Ferguson, just reaching for my blood pressure tablets!!

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'Every individual has the right to arrange their affairs to pay as little tax as possible' or some thing like that is a famous Baron Tomlin quote.

I agree with that.

However, the problem occurs when you decide to get too clever (or too stupid) and outsource your handling of it to someone else, and then assume all is well. If you do that and it messes up, well, your fault.

Always stay within the law. There's enough loopholes in the system - no doubt by design especially for the really wealthy - to ensure that you'll do just fine regardless.

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2 minutes ago, Frugal Git said:

'Every individual has the right to arrange their affairs to pay as little tax as possible' or some thing like that is a famous Baron Tomlin quote.

I agree with that.

However, the problem occurs when you decide to get too clever (or too stupid) and outsource your handling of it to someone else, and then assume all is well. If you do that and it messes up, well, your fault.

Always stay within the law. There's enough loopholes in the system - no doubt by design especially for the really wealthy - to ensure that you'll do just fine regardless.

Most people would prefer lower taxes for everyone and fewer loopholes. Hardly surprising that people get irate when well heeled New Labour luvvies think it is cool to campaign for more state spending etc just so long as someone else has to pay for it. 

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3 hours ago, frederico said:

Hmm , the hatred of celebrities and wealth is beginning to come out of the woodwork. I hope Mrs May actually does something soon or its going to get nasty.

You insinuate the hatred is unjustified.

Let's see here:-

  • MSM tell us to idolise these people, or at the very least acknowledge they are special and important
  • it's not enough for these people to win this kind of undeserved attention, they must also be paid vast amounts
  • the vast majority of these "stars" succumb to self-importance.  Not only is this delusional, it's often offensive (e.g. Lily Allen's nonsense spoken at the Calais jungle)
  • the majority of actors since the 1920s have been picked based on their looks.  They can be as thick as you like, so long as they can always be trained.  Most "musicians" who are touted by the MSM are picked purely based on their looks.  They have karaoke-level singing skills masked by auto-tune or they simply lip-synch to a backing track, they don't write their songs, and the proof that they are just based on their looks is that their career is over when they hit their mid 30s.    Exceptions occur when a name has enough brand value to demand "one more album" (rinse and repeat).
  • 90%+ of the people idolising these people have taxes taken out of their wages before they are paid.  They do not join elaborate schemes to minimise their tax
  • Many of these "stars" espouse socialist views.  They cry over Trump and Brexit.  Yet with utter hypocrisy, they deliberately do NOT pay into the "common pot".  They want the little people to do that. 

What's not to hate?

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4 hours ago, frederico said:

Hmm , the hatred of celebrities and wealth is beginning to come out of the woodwork. I hope Mrs May actually does something soon or its going to get nasty.

It's not a hatred of celebrities or wealth, I respect anyone who has worked hard for their money. It is hatred for people who cheat the system, who not mind the low earners paying the taxes whilst they swan off on an expensive holiday knowing full well their tax dealings are dodgy. 

Everyone who earns should be paying their taxes, it's not one rule for the elite and another for the rest. I hope more tax dodgers are caught.

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8 hours ago, RentingForever said:

Basically this was a highly leveraged scheme where you paid in say £50k in order to generate a £1m loan in order to (clubbing together with others) buy the rights to a film. The income from the film would pay off the loan over twenty years, but in the meantime the interest on the loan could be offset against your tax elsewhere. So your £50k would get you say £100k tax offset every year.

WTF is this? The Producers 2?

Doesn't sound safe or clever at all.

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1 hour ago, Parkwell said:

WTF is this? The Producers 2?

Doesn't sound safe or clever at all.

No it doesn't.

Leverage your investment, leverage the tax relief. Everyones a winner but HMRC.

I mean, jesus, can did their spidey sense not tingle? SUrely they have other, non bent advisors whod say 'barge pole!'

 

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10 hours ago, Frugal Git said:

'Every individual has the right to arrange their affairs to pay as little tax as possible' or some thing like that is a famous Baron Tomlin quote.

I agree with that.

However, the problem occurs when you decide to get too clever (or too stupid) and outsource your handling of it to someone else, and then assume all is well. If you do that and it messes up, well, your fault.

Always stay within the law. There's enough loopholes in the system - no doubt by design especially for the really wealthy - to ensure that you'll do just fine regardless.

You may agree with it but the Baron Tomlin ruling has long since been overruled. I actually first came across it on Property118 where Busta was using it to justify his schemes . Apparently it is commonly used as a key principle of UK law to justify aggressive tax planning schemes. 

It has since been overturned (almost immediately I believe) and carries no weight in an argument with HMRC.

 

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2 hours ago, Ah-so said:

You may agree with it but the Baron Tomlin ruling has long since been overruled. I actually first came across it on Property118 where Busta was using it to justify his schemes . Apparently it is commonly used as a key principle of UK law to justify aggressive tax planning schemes. 

It has since been overturned (almost immediately I believe) and carries no weight in an argument with HMRC.

 

Funny you should mention Bus t'Malta. Fans of the BTL comedy genre may wish to review the list of officers of the THE CLOSE FILM SALE AND LEASEBACK (2003/4) LLP on the Companies House website.

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12 hours ago, Frugal Git said:

'Every individual has the right to arrange their affairs to pay as little tax as possible' or some thing like that is a famous Baron Tomlin quote.

I agree with that.

However, the problem occurs when you decide to get too clever (or too stupid) and outsource your handling of it to someone else, and then assume all is well. If you do that and it messes up, well, your fault.

Always stay within the law. There's enough loopholes in the system - no doubt by design especially for the really wealthy - to ensure that you'll do just fine regardless.

As I understand it, that argument is now the flaw in tax avoidance schemes.  Since 2013 the 'general rule' is that if an investment is primarily for tax avoidance, then it is a tax-avoidance measure and penalties can be made.  It doesn't matter if it is a legal loophole that they've found, if HMRC decide it is used for tax avoidance then HMRC can come after you. I don't particularly mind this rule (everyone should just pay their share), but just playing the 'there's enough loopholes in the system' game can still get you into trouble.

[this is what happened with the schemes currently in the news -- when the investments were made there was no doubt at all that it was completely legal.  HMRC decided in hindsight that whilst legal, they were abusing the system / taking advantage of a loophole in the system]

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20 minutes ago, dgul said:

As I understand it, that argument is now the flaw in tax avoidance schemes.  Since 2013 the 'general rule' is that if an investment is primarily for tax avoidance, then it is a tax-avoidance measure and penalties can be made.  It doesn't matter if it is a legal loophole that they've found, if HMRC decide it is used for tax avoidance then HMRC can come after you. I don't particularly mind this rule (everyone should just pay their share), but just playing the 'there's enough loopholes in the system' game can still get you into trouble.

Wow - common sense used at last by the HMRC!

Who thought to use discretion?!

I thought accountancy and tax was all about being robotically black and white about things!

Ahhhhh, the magic of applying discretion: I know you're cheating.  You know you're cheating.  You're not doing anything illegal but I'm going to bust your chops anyway. 

If we never used discretion, we wouldn't need law courts and judges.

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