In a long-running case involving film schemes, HMRC has won a case involving the abuse of a tax avoidance scheme estimated to be worth around £100m run by Little Wing Films, after four men falsely claimed to have invested £275m into offshore companies
The scheme was run by Little Wings Films and claimed that for every £100,000 invested, higher rate tax payers could reclaim £130,000 in tax repayments from HMRC. This attracted investment from football players, investment bankers and a pop star.
There were 275 investors that deposited more than £76m into the scheme with the belief that they were helping the film industry while reducing their tax bill.
Little Wings Films was set up by accountant Keith Hayley and financial advisers Robert Bevan and Anthony Charles Savill to develop film projects.
Norman Leighton, an accountant and corporate services provider based in Monaco, was also involved with the investment scheme, which claimed that more than £250m was being spent in Monaco on genuine activities.
They claimed to have spent £250m on pre-production and development packages for film projects created in Monaco, HMRC discovered that these only costed £4m and were made in London.
The men falsely inflated expenses to more than £275m to increase the scheme’s financial losses. They enabled the investors to claim about £100m in tax repayments which HMRC is beginning to recover.
As part of the scheme, a number of offshore companies were set up, including Fat Cat Films Ltd, and paperwork was falsified.
Companies were registered in the British Virgin Islands that claimed to operate in Monaco, Geneva and the Channel Islands, fronted by family friends in the Philippines and Kolkata.
They passed investor funds through their bank accounts numerous times to inflate the amount invested and therefore the scheme’s losses.
The men were found guilty at Birmingham Crown Court and are due to be sentenced on 24 June 2016.
Commenting on the judgment, Dawn Register, partner, BDO tax dispute resolution, said: ‘This is a huge win for HMRC, who is determined to send out a clear and strong message that the promoters of “dodgy” tax schemes will be held to account. The four individuals who signed up investors into what may have looked like legitimate tax planning at the time, are now likely to face lengthy prison sentences.
‘For investors who were often completely oblivious to the underlying arrangements of these tax schemes, they are wise to take urgent action to check their personal tax position. Seeking an independent opinion is recommended.
‘It is particularly important for investors to make a disclosure and reconcile their tax position with HMRC before April 2017; after this date they could be subject to HMRC’s new ‘naming and shaming’ laws with all the reputational risk and damage that ensues.’
