Film Scheme Fraud
12/2/2016• 0 Comments •
HMRC has initiated more than 2,600 prosecutions since 2010 but it remains unusual to prosecute investors in tax avoidance schemes. Signs that the net was being cast more widely emerged in 2013 when the Crown Prosecution Service claimed “an important breakthrough”, which extended the reach of criminal law after a successful prosecution of individuals who devised and operated sophisticated tax avoidance schemes.
The CPS publicly stated such cases often involved highly intelligent individuals, with close knowledge of tax laws who went to great lengths to dress up “dishonest and fraudulent” schemes. The CPS further alleged that some schemes from the outset involved signs of dishonesty, such as false or misleading documents, false turnover figures, hidden trading transactions, or payments that did not reflect commercial reality. It now says investors in tax schemes who signed certificates, saying they were “sophisticated investors”, were at risk as well as the actual promoters of the schemes.
In Operation Crystallite Robert Lizar Solicitors acted for a defendant in relation to an investigation into such an alleged abuse.
The HMRC investigation was complex and ongoing for several years before a number of Defendants (those marketing the Investment Scheme, and the Investors themselves) first appeared at the City of London Magistrates Court.
One report from the outset of the case is found here:
It had become attractive for wealthy UK taxpayers to invest into a film production and then write down the investment’s value to claim tax relief on the loss- i.e. sideways tax relief.
So complex was the case it was divided into a number of separate trials and because of the allegedly ‘pivotal’ role attributed to a number of Defendants, they appeared in more than one trial.
Our client appeared in two of the trials during which all denied wrongdoing. Some investors claimed they were unaware of “active member” status and that they had to spend 10 hours a week working on the films in order to qualify for the tax rebates.
Other investors simply denied that they were aware of what the nature of that work had to be.
Of particular note, the Prosecution alleged that the RBS bankers submitted fake diaries detailing false activities allowing them to claim they were “active partners” working 10 hours a week for their respective LLPs — a necessary legal requirement to reclaim the tax rebates.
However, our client was successfully acquitted by both juries after two lengthy trials at Southwark Crown Court. A number of other Defendants were convicted and made subject to custodial sentences ranging from 4 1/2 to 8 years.
As always reports tend to focus on those convicted, not those acquitted:
Much consideration was given as to whether the schemes themselves were unlawful, or whether it was the failure to comply with the requirements under the scheme to the letter.
Even in cases where there is no suspicion of fraud, HMRC has mounted a barrage of challenges against investors in schemes set up to make high-risk investments in technology, films and music. It has already raked in £1bn from users of tax avoidance schemes under new rules that allow it to collect disputed tax upfront.
Therefore if you find yourself, or someone that you know being investigated by HMRC do not hesitate in contacting Robert Lizar Solicitors and request an initial free interview with our experts in this field.
Any person finding themselves in the unfortunate position of being investigated by HMRC for this type of matter (or any other alleged fraud) needs immediate legal advice. Moreover that advice should be from a lawyer specialising in defending criminal prosecutions of alleged serious financial impropriety such as ourselves, as opposed to a tax lawyer with whom that person will be more familiar in dealing with.
Mr Adam Foster and Mrs Amanda Long represented the client in Operation Crystallite over the 30 month period between arrest and the final not guilty verdict and both have substantial experience.
Mr Michael Sophocleous also has substantial expertise in this area.
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