A while ago I wrote about a warning from an Australian tax lawyer, who has been involved in Australia’s successful and high-profile Operation Wickenby, a project to catch big-time tax cheats. He explained how, because of the slipperiness of some of the offshore structures being set up — typically involving you pretending not to own or control some asset, while in reality still being in control — you could end up getting diddled out of your money by unscrupulous offshore operators, with few options to get your cash back. And it could get worse still:
“The catastrophe to be avoided, at all costs, is being detected by the Tax Office (or other local or overseas agency), losing the benefit of the “hidden” assets or structures, and then being left stranded with substantial liabilities for tax, penalties and interest, with insufficient available funds to call on.”
This is not uncommon. I was reminded of this when reading a new article by Britain’s Daily Mail, on the subject of the tax shenanigans of comedian Jimmy Carr. it cites tax experts who say there has been a sharp rise recently in celebrities going bankrupt after dipping into aggressive tax schemes.
Celebrity investors have been encouraged to invest in high-risk films, for tax reasons – then lost their shirts in the process when their punts did not pay off. (I would imagine that if you’re a celebrity footballer, then tax and investment strategy most likely won’t be your strongest suit: which will make celebrity footballers particular targets for the less scrupulous operators.) The article cites footballer Lee Hendrie, who earned £24,000 a week at the peak of his career but was declared bankrupt in January with a $200,000 tax bill.
‘The debts have apparently been a result of a tax scheme Hendrie was advised to enter into which was rejected by HM Revenue And Customs, leaving an unpaid tax bill which led to the petition,’ RSM Tenon said. ‘Investments made during his peak years, in properties and film-related partnerships, went bad, leaving no money for Hendrie to turn to when times were tough.’
If you are going to swim with the sharks, then it is not exactly surprising if you get bitten.