Deloitte is facing legal action from the promoters of the failed Icebreaker scheme, which was ruled as tax avoidance based on misuse of sideways relief at a recent First Tier Tribunal (FTT) hearing.
The FTT ruling in the Acornwood case, which centred on the Icebreaker scheme, dismissed in part several partnerships’ appeals concerning arrangements entered into for the acquisition and exploitation of intellectual property rights.
In the case, Acornwood LLP & Ors [2014] TC 03545 UKFTT 416 (TC), the FTT found that although each of the partnerships was carrying on a trade of the exploitation of intellectual property rights, the scheme substantially failed in its purpose to secure sideways loss relief for the partnerships’ members and to increase the amount of the relief by unnecessary borrowing, which was purported to be available for use in the exploitation of intellectual property rights, but was in reality used to service itself. The FTT ruled that the scheme was set up to shelter over £330m from tax.
The decision to consider legal action follows an article by Deloitte head of tax policy Bill Dodwell in the CIOT magazine, Tax Adviser, where he said that ‘we should congratulate the tribunal on the insight and plain speaking which makes it clear there cannot possibly be a successful appeal’.
Caroline Hamilton, the promoter of the Icebreaker scheme and managing director of IMSL, the company behind the Icebreaker scheme, described the comments as ‘extraordinary’.
IMSL had hired Deloitte LLP, before the FTT hearing, and the firm had instructed Acornwood’s counsel at the tax tribunal hearings, which included Jonathan Peacock QC and Hui Ling McCarthy.
‘This appears to be in clear breach of Deloitte’s duties as Icebreaker’s instructing solicitors, including to act at all times in our best interests and not to allow Deloitte’s own interests to conflict with ours,’ Hamilton wrote in an email to investors.
Icebreaker has appointed City law firm, Rosenblatt Solicitors to ‘take action’ against the firm if necessary. In a statement, Rosenblatt Solicitors confirmed that it is acting for Icebreaker.
Deloitte declined to comment.
The original judgment is available here http://www.bailii.org/uk/cases/UKFTT/TC/2014/TC03545.html