Withers, the international law firm which specialises in advising individuals on tax matters, is launching a major class action suit aimed at helping investors whose investments in certain tax avoidance schemes have been challenged by HM Revenue & Customs.
The firm said it is putting together the group action because it believes many individuals caught up in these schemes are unlikely to find adequate resolution through the methods that most are being advised to take. In addition, it said its experts believe many of these investors, including many high-profile celebrities, “have a stronger case than most that they were miss-sold these schemes, and, under the Financial Services and Markets Act, should never have been targeted by promoters, banks and financial intermediaries in the first place”.
“With a repayment deadline of April 2016 looming for many [of these] investors, they are increasingly desperate in their search for effective answers,” Withers said in a statement on Friday announcing the class action, adding that it had “long expected a wave of litigation in this area”.
On a special website dedicated to the group action, www.witherstaxcase.co.uk, the firm said litigation partner Roberto Moruzzi is heading up the operation, supported by former HMRC lawyer Tessa Lorimer, and that they were joining forces with group action specialists Litigation Management, in order to “provide support for individuals, partnerships and trusts who have entered into tax planning arrangements that are now subject to HMRC scrutiny, and specifically those that have used avoidance schemes”.
Some observers in the past have argued that both the investors in these schemes as well as the wealth managers who put their money into them have been victims of a tax collecting body that has changed its definition of what constitutes a legitimate tax avoidance measure, and now regards what used to be tax avoidance as tax evasion. Lorimer admits that many of the marketed schemes were in fact “set up to take advantage of legitimate tax reliefs offered by the government – for instance, [by] investing in films or renewable energy”.
However, she adds, a large number of these schemes “never traded with a view to actually making a profit – they were simply tools to create a loss for the investors to write down their tax returns.
“Despite complex disguising mechanisms, they were never intended to work as real businesses, and HMRC will not allow tax relief on them.”