The Sunday Times broke the news on Sunday that:
[HM Revenue & Customs] investigators have raided the homes of executives at a top City accountancy firm over a £100m tax avoidance scheme used by leading sportsmen, musicians and investment bankers.
The firm in question was Vantis - an AIM listed accountancy practice.
The Sunday Tines suggests (and it's no more than that right now) that:
the firm - and its executives - were involved in setting up a sophisticated tax scheme to exploit Treasury concessions on charitable donations. It gave investors the opportunity to at least double their money, and in some cases quintuple it, within months.
The way it is alleged they did this was simple. The firm set up companies on the Channel Islands Stock Exchange. The clients of Vantis bought shares in those companies, which then soared in value, apparently. The shares were then gifted, capital gains tax free, to charities and the former owners claimed tax relief for the value of the gift, so getting tax relief at 40% on the value gifted, not the original cost, which was much less. Under charity law as it stands at present the charities had to accept the gifts. Those using the scheme made application for massive tax refunds from the Revenue.
As the Sunday Times notes:
The Revenue is investigating whether the price of the shares was manipulated for tax purposes. The charities, including the Terrence Higgins Trust and Action Medical Research, now find it almost impossible to sell the shares as virtually no trading occurs on the Channel Islands stock exchange. The Vantis companies account for almost half the firms on the exchange.
The Sunday Times suggests almost 400 people used the scheme. The Revenue said:
"For legal reasons we can't comment on specific organisations. We take any abuse of the Gift Aid system very seriously and we will come down hard on any fraudulent abuse of Gift Aid. Any scheme that targets the charity sector is particularly offensive and HMRC is taking decisive action against them and those who market them."
I have no idea whether the allegations are true or not, but suspect the Sunday Times is pretty sure of its story. The simple fact that the companies used for this purpose now make up half the Channel Islands exchange suggests that something serious is going on. As ever, questions arise:
- What did Vantis think it was doing?
- Is it possible for an accountancy firm to be quoted and be ethical, or does being quoted mean ethics always come second?
- Why didn't Channel Islands regulators stop this?
- What does this say about financial services regulation in he Channel Islands?
- Will the States of Jersey and Guernsey investigate?
- How was the price rise engineered? If it was artificial will the Channel Islands be prosecuting as well?
- Why has no price fixing investigation been reported in the Channel Islands?
- Why haven't the charities involved been protesting publicly? Who told them not to?
- Will the accountancy professions professional bodies be condemning thus as soon as they reopen in the New Year?
- Will shares in the companies in the Channel Islands be suspended?
- Will Vantis have its shares suspended if found to be involved in market abuse?
- If major firms of accountants knew this was happening (and you can bet they did) why didn't they 'shop' Vantis to the Revenue and to the professional bodies for bringing the profession into disrepute?
- Would anyone like to join me in making such a complaint now so that we ca see what happens?
Put simply, where were the honest accountants who could have stood up and said 'no' to these deals? For the sake of the profession it's time people did just that. Whether or not they're legal, they're clearly unethical. That's good enough reason to shout. It's time honest accountants did a bit more shouting. That way dodgy dealers can be driven out of this profession, for good.
And I want to hear our professional bodies both saying that, and proving the mechanisms to ensure it can be done. Now. It's the least the public can expect of them.
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[…] Richard Murphy comments on a Sunday Times report that Vantis is in hot water with HMRC over a dodgy tax scheme aimed at entertainers and sports persons. Apparently, the devout Muslim Yusuf Islam (Cat Stephens to you and me) is caught up. I wonder how many other enterprising firms of professionals have fallen into the same trap? Once again the Channel Islands are the focus for attention. […]
I should preface this by saying that Vantis are currently only “helping with enquiries (allegedly).
In this vein, I must admit to a sense of disappointment when I saw some years ago a laminate (as it was presumably intended to be well-fingered) A4 card that had been produced by a (now defunct) national firm of accountants on tax schemes to indicate
1. client circumstance
2. outline tax scheme
3. tax saving
4. minimum transaction size
5. cost and fee income
When one of the rows detailed:
1. high director/employee bonus
2. loan in Turkish lira
3. avoids income tax and NI
4. I forget transaction size
5. legal fees for loan documentation etc, fee I forget
I think you will get the picture.
The card had their 20 or so top tax schemes on it.
These cards were handed out willy-nilly for staff to identify whether a client might be persuaded to use the scheme. Most staff of course could never have understood how the scheme worked. All a bit grubby in my view, apart from the shiny laminated card.
More recently, I understand from an unimpressed colleague of mine that at a meeting with a mutual client, two Arthur Daly types from Grant Thornton produced a thick bound volume marked confidential which contained a greater number of such paper chase schemes when they tried to advise a client of his. By my colleague’s account the Arthurs had only a rudimentary grasp of the scheme they were offering. Later, I threw a spanner in the works and the client did not proceed with the proposed GT scheme.
There are, I think, some people now in accountancy who would be better suited (with apologies) to the seedier end of the second hand car trade.
I know ‘Roger Rabbit’s’ identity
He is a professional accountant. I accept his word when he names names. I cannot verify the truth of what he says
Richard Murphy
After posting the previous comment it occurred to me that I know a former Grant Thornton tax partner who left largely because (he told me) he was under so much pressure to sell tax products, not all of which he considered suitable or desirable.
This resonates with Roger’s story. And Mike Warburton’s oft quoted opinion that there is no morality in taxation: it’s all a matter of the law.
That doesn’t mean GT are doing anything wrong as such, of course. But tax avoidance is unacceptable conduct. After all, isn’t any action that seeks to secure benefit by avoiding the obligations of the law anti-social at best, unethical at worst?
Richard
It’s interesting you mention a former tax partner who left GT due to pressure to sell tax products. I can just about still remember when bank managers were just that, unlike the salesmen they have become, I wonder, is there a similarity here …. Are parts of the ‘profession’ training and employing ‘salesmen’ rather than accountants and tax advisers?
[…] Accountancy Age reports that Michael Parkinson has dropped out of the totally artificial tax planning schemes organised by UK accountants Vantis. […]
[…] unwarranted tax relief given on charitable donations to higher rate tax payers, which HS been subject to abuse over time, and to at the same time massively simplify the administrative burden on charities and […]
[…] Vantis schemes were horribly […]
A further development in this case is reported in the Sunday Times today. See also TaxBuzz blog for comment.
[…] scheme is the latest arrangement the taxman has nipped in the bud after the well-documented case against Vantis, which has seen two of its directors hauled to the High […]
[…] scheme is the latest arrangement the taxman has nipped in the bud after the well-documented case against Vantis, which has seen two of its directors hauled to the High […]