With a number of high-profile individuals, including many sportspeople, facing significant financial loss after the failure of a number of well-publicised tax avoidance schemes, we explore what action they can now take against the people that advised them.
We also highlight important changes to the Finance Act that will require all investors in schemes such as Goldcrest to pay the HMRC any disputed tax within 90 days. They will not be in a position to recover the money until investigations, which could take years to complete, are officially concluded.
One of the key questions is whether an athlete can bring a professional negligence claim over advice to invest in a scheme that fails. Unfortunately the answer is not straightforward.
This is of serious concern if an athlete has significant exposure but even more so if they have recently retired and suffered a major drop in their income.
Broadly, professional negligence occurs where an adviser fails to perform their responsibilities to the required standard. For a claim to succeed, the investor must show that the professional owed them a duty of care, that this duty has been breached and that loss or damage has arisen as a result.
A significant obstacle in this process is time. The athlete will usually have to commence a claim within six years, although there are some situations where this can be extended.
Any athlete considering a professional negligence claim should act fast to ensure that they are still within time to commence a claim. Our experienced team can assess the circumstances and confirm the likelihood of success of a claim. We can also advise athletes facing a large tax bill on restructuring options.
Meanwhile, changes to the Finance Act 2014 that came into force on 17 July 2014, require investors to pay the HMRC any tax liabilities upfront in respect of schemes that are under investigation before an investigation is concluded.
Under the new "accelerated payment provision" the investor may be asked to pay the disputed tax within 90 days of receiving a demand letter, even though investigations and litigation proceedings often take many years to conclude. Also of concern is the retrospective nature of the proposals which could go as far back as 2004.