Take That singers 'invested £26m in scheme to be challenged over tax avoidance'
MEMBERS of pop group Take That invested at least £26m in a scheme believed to be a method of avoiding tax, it has been claimed.
Singers Gary Barlow, Mark Owen and Howard Donald, along with their manager Jonathan Wild, invested money in a music industry investment scheme used by nearly 1,000 wealthy individuals.
Revenue and Customs officials confirmed it believes the partnerships are designed to allow members to avoid tax and said it will be attempting to close the structure at a tribunal later this year.
According to an investigation by the Times newspaper, the singers invested in a partnership run by Icebreaker Management Services.
If HMRC are found to be correct, the company could have to pay back millions of pounds.
A spokesman for HMRC told the Times: “We have taken firm action to protect the Exchequer from unacceptable tax loss. We do not accept that the Icebreak tax avoidance schemes have the tax effects their promoters claim.”
A spokesman for Icebreaker denied the partnerships were designed to avoid paying tax, saying they were created to invest money in the music industry for taxable profit.
“Abuse of the tax system for personal gain is, of course, never acceptable”, he said.
Lawyers for Gary Barlow, Mark Owen, Howard Donald and Jonathan Wild confirmed they were investors in two partnerships but told the Times they paid significant tax.
They did not believe they were tax avoidance schemes, lawyers said, and investments were made after taking financial advice.
There is no suggestion that the scheme is illegal.
Matt Hodson, working on behalf of Icebreaker, told an undercover Times reporter: “They invested money into the Icebreaker partnership and therefore not paid the Revenue the tax.
“They don’t like paying the taxman.”
There is no suggestion that fellow Take That member Jason Orange or Robbie Williams invested.
Mr Barlow has recently received an OBE after being heavily involved in the Queen’s Diamond Jubilee celebrations.
The partnerships work by allowing investors to make a contribution of their own money, which can be boosted by an offshore bank loan.
The money is then invested buying music rights in artists, with profits paid back into the partnership.
The investor can then gain tax relief on the full amount invested, regardless of their personal contribution. The scheme also allows investors to claim tax relief on first year losses, which can be offset against other income.
This means an investment of £40,000, boosted by a loan of £160,000 could generate £77,520 in tax relief. An investment of £200,000 would result in an earning of £1m.
The investigation by the Times found Mr Barlow, Mr Donald, Mr Owen and Mr Wild joined two Icebreaker partnerships, one in March 2010 and another in September.
In March 2010, they put £5.2m of their own money in a partnership called Larkdale LLP and borrowed a further £20.8m.
According to the newspaper, records show Larkdale registered a loss of £25.2m in April 2010, which was “available for discretionary division among members”.
The scheme was discovered by the Times investigation after a representative of specialist tax mitigation company Mulbury Hamilton marketed it.
The representative said they were completely separate companies so HMRC could not link them, “otherwise…it fails for them”.
A spokesman for HMRC said: “HMRC has already successfully challenged an avoidance scheme run by Icebreaker 1 LLP winning on the main arguments in the tribunals.
"This type of scheme will fail where there is circular borrowing which serves no economic purpose or which cannot in fact be used in a trade.
"We are now preparing to litigate Icebreaker 2 but for legal reasons cannot say more at this time. We examine the implementation of avoidance schemes in detail and will not let any aspect of these cases go unchallenged.”
The Icebreaker website reads: "Since 2004, Icebreaker has been bringing together investors, entrepreneurs and creative talent.
"There is a particular emphasis on commercial projects in the creative and technology industries. Income from these projects is shared between the relevant Icebreaker LLP and the individuals and companies involved.
"Members are expected to bring their own business and personal experience to their LLP and to contribute to its trade by playing an active part in the LLP's commercial activities.
"Accordingly, membership of an Icebreaker LLP may not be suitable for an individual who is, for example, simply seeking a possible means to obtain tax relief."
A spokesman for HMRC said they would be challenging the scheme in a tribunal in November.
He added: "HMRC is extremely effective at shutting down tax avoidance schemes fast and effectively. The avoidance “industry” has been seriously undermined by HMRC’s focus on tackling avoidance – preventing billions of pounds of tax being diverted from the Exchequer.
“In our 2010 spending review the Government made £917m available to us to tackle avoidance, evasion and fraud. This is being used to ensure a level playing field for all taxpayers.”