Abusive tax avoidence – Don’t fall foul of GAAR

Voltaire wisely pointed out, ‘Doubt is not a pleasant condition, but certainty is absurd.’ So when presented with a sure-shot financial win, should one dive in headfirst?”

In the heart of London, not far from the iconic dome of St. Paul’s Cathedral, a tantalising financial proposition began making waves. It was known as the “Icebreaker Scheme”. Rather than being a mere investment venture, it was touted as a chance for investors to tap into the lucrative world of the arts, particularly music and film. The scheme’s modus operandi was alluring: individuals could invest money, ostensibly intended for the support of emerging artists and projects. In return, they would not only earn a return on investment from potential profits, but also benefit from considerable tax reliefs 💰

As investments poured in, huge sums were set aside for supposed “partnerships” – groups of investors banded together to support specific art ventures. However, a significant proportion of these investments were used to pay off previous investors, in a manner reminiscent of a classic pyramid scheme. Moreover, many projects, though legitimate on paper, barely made any commercial revenues. Instead, they existed mainly for the benefit of the scheme 👈

Word spread fast, and the cobbled streets of London’s financial district were abuzz with tales of the next big art project or emerging film set to be financed by Icebreaker. Exclusive soirees were hosted, with whispers of mingling with top-tier artists and the promise of huge tax breaks further fuelling the allure 😟

But when the curtain was pulled back, the reality was starkly different. HM Revenue & Customs (HMRC) began digging deeper into the scheme’s finances. Their discovery? A carefully constructed web where the primary aim wasn’t to promote art or film but to gain tax advantages. The tax reliefs that investors were claiming far exceeded any actual financial support to the arts 👈

As the reality of the scheme unfolded and HMRC clamped down, dreams of red carpet events and art galas faded, replaced by looming legal battles and the grim reality of lost investments 😟

The fall of Icebreaker became a watershed moment in the annals of investment schemes, highlighting the perils of chasing after gold at the end of a too-shiny rainbow. It served as a stark reminder for investors everywhere: always look beneath the surface, and never let glitz cloud your judgment 👈

HMRC have alot powers at their disposal to attack what they regard as ‘aggressive’ or ‘abusive’ tax avoidance arrangements. Part of that is something called the GAAR (general anti-abuse rule)

Talk to an expert if you are unsure!😉

Disclaimer: Paul Stankiewicz is the owner and principal at Paul Marks & Co Chartered Accountants which is the trading name of Paul Marks Ltd a Limited Company registered in England and Wales (registered number 4487645).This article is designed for the information of readers only and is the opinion of the author only. Readers should not act on any of the information contained in this article without seeking professional advice. Nothing in this article constitutes advice, nor does the transmission, downloading or sending of any information or the Material create any contractual relationship. Links to third party websites are provided as a convenience to the reader, Paul Marks Ltd does not control and is not responsible for any of those websites or their content. Paul Stankiewicz and Paul Marks Ltd accepts no liability or responsibility whatsoever for any loss or damage suffered by any user of the information contained on or accessed through this article or the Material downloaded.