In January 2014, the CPS and HMRC announced that thirteen individuals have been charged with conspiracy to cheat the revenue of approximately £2.5 million. The allegations are in connection with a complex film tax partnership scheme over a period of 5 years. A number of the defendants are investment bankers.

HMRC and the CPS were given a large additional budget to prosecution tax fraud cases in 2013 and have vowed to bring five times the number of prosecutions than they have in the past.

This was shortly followed the decision by the Upper Tribunal to rule in favour of HMRC and against Eclipse 35 investment scheme, a particularly high profile scheme with many well-known investors who invested £1 billion in it. This is one of 31 film tax partnerships that HMRC have firmly within their sights.

What Should You Do If You Are An Investor?

Take independent legal and tax advice immediately to see what recourse you may have. You may well be facing a tax liability of approximately ten times your original investment, which you are unlikely to have accounted for.

There is possible address against your IFA (independent financial adviser) and/or your tax adviser/accountant, all of whom should be insured.

You can make a complaint to the Financial Services Ombudsman, though you should note that as a result of a very recent Court of Appeal decision, Clark v In Focus 2014, once you have received compensation from the FSO you will be unable to pursue the IFA or the company for additional redress, e.g. pursuing against their assets.

The Court of Appeal relied on the legal principle of res judicata, essentially that the investors had already gained restitution in the sum of £100,000 as a result of the award from the FSO (the current maximum financial limit is now £150,000) which precluded them from continuing to pursue the same claim.

The claim forms are quite comprehensive and you can complete them yourself as they are designed for the lay client, but take advice first. Will you gain more by using other civil redress processes?

Don’t be dissuaded from looking carefully at the position of your advisers, even if you are currently relying upon them to provide you with information. Look at the advice and representations that they made, which persuaded you to invest in the first place. Did they warn you that this ‘investment’ could attract the attention of HMRC? Or that the Revenue may not sanction the scheme and that your investment would be at risk?

Are you concerned that you would be deemed to be a ‘sophisticated investor’, which has a very specific definition and consequences?

Don’t be deterred when your advisers point out their disclaimers on their terms of agreement, or when they assert that they merely processed your application and were acting as a ‘post box’ only.

What if the ‘partnership’ insists that you as a member pay legal and accountancy fees upfront, as they intend to defend HMRC proceedings? Perhaps you don’t agree. Perhaps you want to settle with HMRC and avoid expensive litigation. Maybe HMRC have approached you directly offering to settle. All of these issues need to be addressed quickly, so that you know where you stand.

We are currently advising a number of investors who find themselves the subject of an HMRC investigation.

We work with some of the leading tax accountants and barristers in the country, and if you need advice and assistance (either as a defendant in criminal proceedings or as an investor in civil proceedings) contact us on 020 7387 2032 or complete our online enquiry form here.