Sunday, October 11, 2009

Vantis tax advisers to face charges of “cheating" re tax scheme

Today's report in the Sunday Times, headlined: Stars caught up in £219m tax 'scam' concerns "two leading City accountants who have been charged with a multi-million-pound tax scam involving celebrities, sportsmen and other wealthy clients exploiting charitable donations".

If the reports are true, Roy Faichney and David Perrin (neither of whom are qualified as accountants*) will be facing charges around 3 years after their homes were raided over, what I assume to be, the same £100m tax avoidance scheme used by leading sportsmen, musicians and investment bankers. The Sunday Times reported this story and outlined the scheme in December 2006. At the time many tax commentators thought that HMRC's actions were heavy handed. I know I did. The same 'stars ' were named then as are mentioned in today's paper, ie: Martin Corry, captain of the England rugby team, and Yusuf Islam, the musician formerly known as Cat Stevens.

Not surprisingly Vantis is reported to have announced that "David Perrin and Roy Faichney, employees of Vantis Group, will be strenuously defending any charges brought against them."

In my talks I often stress that there can be a significant time lag between when tax advice is given, acted upon and tax refunds received and when HMRC will challenge the transactions or tax refund claims. All too often promoters of aggressive schemes imply that all is well when HMRC have received a disclosure of the scheme and have permitted tax refunds to be paid out. But this is rarely the whole story. The full picture typically only emerges many years down the line.

There was another example of this time lag earlier this year. The Mercury Tax Group announced that it was preparing a damages claim against HMRC following a court hearing that ruled the taxman had unlawfully obtained warrants to raid the firm’s offices and the home of its chief executive. The raid, related to a 'gilts strip scheme' took place almost two years earlier and was widely considered to be an example of HMRC using a sledgehammer to break a nut.

In both cases (Mercury and Vantis) I would stress that mere accusations by HMRC are not proof that the law was broken by the accused. The old maxim "Innocent until proven guilty" is as true in tax planning as it is in all other cases. I'm sure that in each case the advisers were satisfied that their advice to clients constituted legal (albeit aggressive) tax avoidance rather than tax evasion. In other words they did not intentionally break the law nor encourage clients to do so. And having taken Counsel's opinion, as I'm sure they did, they would have expected to be protected against accusations of illegal activity. As would their clients. And the Mercury case has progressed such that it seems that HMRC eventually backed down.

So why do I draw attention to this case on the TaxBuzz blog?

Quite simply because it supports my contention that pre-packaged aggressive tax avoidance schemes are more risky than some advisers would have you believe. And many of those who promote such schemes do not have the technical understanding of the risks to ensure that their clients fully appreciate them before they decide whether or not to proceed.

As is well known I am no fan of aggressive avoidance schemes and am uncomfortable with the idea of 'planning upto the wire'. Interestingly I am finding more and more experienced tax advisers seem to take a similar view. For example, last week a very well known tax lecturer told me that they would never put their name to any book or article titled: "How to avoid tax on...."

The times they are a-changing.

*For the record I know Roy and David as I used to work with them at what was then WJB Chiltern plc before they left to join Vantis almost 6 years ago. I always liked them but we have not spoken for some time.

Earlier relevant posts:
- Bending vs breaking tax rules
- Tax avoidance is a card game - the metaphors multiply
- Tax avoidance - what are you allowed to do? A simple guide.
- Tax avoidance schemes - a simple guide
- Naive promoters of tax avoidance schemes
- Five facts all accountants need to know about tax avoidance schemes
- Five more facts all accountants need to understand about tax avoidance schemes
- Tax cheats need to think again


  1. I know nothing of these particular cases, but it is true to say that in order to convict a person of tax evasion the Crown must make a jury sure that the defendant has been dishonest. That is to say that he has done something which he himself realised was dishonest by the standard of ordinary and decent people.
    Tax schemes can be aggressive without being dishonest and it is by no means certain that a scheme which upsets HMRC is a dishonest scheme.

  2. Thanks for your comment David. It accords with the view of those, including me, who felt that HMRC was being heavy handed when launching raids on the tax advisers in both of the cases noted above.

    It is often said that HMRC's recent actions are intended to frighten off those who might otherwise be tempted to promote or to engage in such tax schemes.

    Were I still in practice I think such a tactic would work. The risk of getting tied up in such a legal case would be something I would want to avoid at all costs, even if it meant forgoing the prospect of earning high fees for 'selling' such schemes.

    And as I have noted previously on this blog only around 1 in 10 of the clients who themselves understand the risks actually proceed. So the fees earned re those who go ahead need to be sufficient to warrant all of the time spent with the other clients too.

  3. When I am wrong, I admit it.
    A postscript to the above post, in the light of the successful prosecution of Messrs Perrin and Faichney: