The accountant, Terence Potter, and Neil Williams-Denton, an IFA for Greystones Financial Services, have been sentence to 8 and 6 years, respectively, for attempting to steal £2.2m ($3.3m, €3.0m) in a tax fraud which was promoted to a number of wealthy professionals.
Three investment bankers – James Hyde, Phillip Jenkins and Hamish MacLellan, who all worked for Jeffries International at the time of their arrests – were also sentenced for taking part in the fraud after a previous trial in September, which can only now be reported.
“This was pure greed by a dishonest tax agent, a financial adviser, and people who were already wealthy individuals,” said Jennie Granger, director general of enforcement and compliance at HM Revenue and Customs (HMRC) in a statement.
“Those found guilty had no interest in the film industry, or regard for the impact on honest taxpayers.
“While it started with a tax adviser pushing a deeply fraudulent tax scheme, wealthy professionals investing in such schemes should be aware of the pitfalls. Those found guilty believed they were above the law, cheating the system by masking tax fraud as investment in films,” Granger said.
The HMRC investigation into the case, which involved over 100 officers, revealed that Potter devised and promoted, jointly with Williams-Denton, a number of fraudulent schemes to wealthy professionals, which were portrayed as being tax avoidance schemes exploiting legal loopholes.
However, the bogus schemes were fraudulently underpinned by false documents, making them tax evasion.
Potter set up two partnerships that were sold to the wealthy investors. One produced a film called ‘Starsuckers’; the other was a project to develop a package to be made into a film by others called ‘Mercedes the Movie’.
Together both partnerships claimed to have spent £5.7m on the projects. This created artificial losses that allowed the investors to claim back PAYE tax they had paid.
The partnership declared the losses in its tax return and so did the investors, which would have allowed them to recoup up to £40,000 in tax relief from HMRC, for every £20,000 they had invested. However, as the scheme was illegal their claim for tax relief was false. The claims were supported by false documents produced by Potter.
Since the Promoters of Tax Avoidance Schemes legislation, introduced by Parliament in 2014, HMRC has increasingly been targeting schemes it believes are aimed at avoiding or evading tax.
This year famous UK football players and top class cricketers have all been caught up in film schemes accused of tax avoidance.