Ecclestone’s Fraud Case Passes the Ex-Chequered Flag

The former Formula One boss Bernie Ecclestone was, on the 12^th October,  sentenced to 17 months in prison, suspended for two years, on top of a record civil settlement of £652 million after the 92 year old businessman stepped up to the podium to plead guilty to misleading HMRC regarding his overseas tax position, particularly interests in overseas trusts.

The charge of fraud stemmed from allegations that Ecclestone faced in July 2015. Ecclestone had falsely claimed that he was the settlor of only a single trust, in favour of his daughters, and was not a settlor or beneficiary of any other trust, UK or otherwise. HMRC was able to work with the Singaporean tax authorities and discover that Ecclestone was in fact a settlor and beneficiary of multiple trusts, in particular one which held a company that sent £416 million to a bank account in Singapore in 2010.

The Chief Crown Prosecutor, Andrew Penhale, stated “Bernie Ecclestone has pleaded guilty to a single offence of fraud relating to dishonest representations to HMRC. All members of UK society, regardless of how wealthy or famous they are, must pay their taxes and be transparent and open with HMRC about their financial affairs”.

Ecclestone had been under civil tax investigation since 2012 and was given multiple opportunities by HMRC to be honest about his tax affairs, and pay the tax that was due, but he failed to do so.

Mr Ecclestone would have been required to correct the mistakes in his tax affairs through a formal process called the Contractual Disclosure Facility, commonly referred to as ‘COP9’.

COP9 investigations are the most serious type of civil investigation undertaken by HMRC. In the process of a COP9 investigation, an offer is made whereby the individual will receive immunity from criminal investigation and/or prosecution in return for:

• Admitting they have acted deliberately in failing to declare income or gains; and
• Agreeing that they will fully disclose all irregularities in their tax affairs for the relevant period (typically 20 years).

The individual has 60 days to accept or reject the COP9 offer. If the individual accepts this offer the individual is also accepting that they will pay a minimum penalty of 35% of the unpaid tax. Not responding to this offer would be considered a rejection and a criminal investigation will generally begin. If an individual is deemed uncooperative, the level of penalties that HMRC can levy are far higher than if the individual was to cooperate throughout the process.

It is, therefore, important to have specialist tax advisors appointed whenever tax affairs need to be regularised, or if HMRC launches an investigation into an individual’s tax affairs.

Whilst not all of HMRC’s investigations are as severe as Ecclestone’s case, and not all cases take the form of a COP9 case, it is important to seek advice during any HMRC enquiry. HMRC’s most recent and persistent campaign has been a ‘nudge letter’ approach which seeks to raise awareness of a specific issue regarding tax compliance and encourages the recipient to ensure their tax affairs are in order.

How can Edwin Coe Help?

Tax disputes are a stressful and complex process, and the Edwin Coe Tax team is well versed in handling these matters on behalf of our clients. We can help to ensure that a full and accurate disclosure is made to HMRC, this is beneficial to limit further questions from HMRC and to aid in demonstrating a willingness to co-operate with HMRC. Another important factor that we can assist with is determining the reason there has been a failure to correct the historic tax position. Penalties can vary depending on the reason for the failure, for example if it is deemed that there has been a reasonable excuse, the tax penalties due are greatly reduced, or removed entirely.

By seeking professional assistance, you would be giving yourself the best chance of achieving a positive result, protecting your assets and closing the investigation quickly and efficiently. We are experienced in the various disclosure facilities offered by HMRC and have successfully negotiated favourable settlements for our clients.

If you would like to discuss any of the matters raised in this blog, please contact Sean Bannister or any member of the Tax team.

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