An Upper Tribunal case has fined AML Tax (UK), part of Doug Barrowman’s Isle of Man-based Knox Group, for failing to provide HM Revenue and Customs with legally-required information.
The Scottish businessman, who is married to lingerie tycoon Baroness Mone, now faces a £3.3m tax bill as a result.
AML was struck off the Companies House register in 2019 for failing to file accounts. It was a promoter of a loan-based tax avoidance schemes, which recruited thousands of contractors - including doctors, social workers, nurses and IT workers - who later received large bills from HMRC.
The court found that the company “aggressively promoted tax avoidance schemes” in the UK for years and issued it an initial fine of £150,000 for failing to provide HMRC with information.
AML Tax, directed by Arthur Lancaster, was fined after HMRC brought an Upper Tribunal case over the firm’s failure to comply with formal information notices as part of a tax investigation.
The company must now hand over the required records to enable HMRC to calculate the tax owed, which is currently estimated to be more than £3m. The fine is in addition to penalties already issued by HMRC, totalling around £9,000.
HMRC will now examine AML’s financial records to assess its Corporation Tax bill for 2014 and 2015.
The Upper Tribunal case ruling, noted regarding the activity of AML: “The £60,000 of profits declared by AML in truth tells us little about AML’s business activities. The opaque recharge mechanism, backed up by no reliable detail or documentation as to AML’s business, means that we cannot treat it as a relevant figure.
“On all the evidence which we have summarised above, and on the findings of fact we have made, we have formed the view that AML did contribute, to some degree, to the design and implementation of the schemes sold by the group other than merely the annuity planning scheme.
“On that basis, if AML had been rewarded on an arm’s length basis, then it would have potentially been taxable on an appropriate proportion of the £20m which was declared as taxable in the Isle of Man.”
It argued that because of the lack of information provided by AML, the court was unable to form a view built on a “solid foundation”, noting that giving the company a “significant discount for uncertainty” caused by the information vacuum ”we take the view that the tax at risk is not less than £100,000”.
At the other end of the spectrum, the tax at risk would not be as much as £4m, being 20% of total group profits, because that would assume that AML carried on all the profit making activities of the group, entirely from the UK. ”It could, however, potentially be in six figures.”
The case criticised the company for its conduct and highlighted the role of director Lancaster, who is a Chartered Accountant and Chartered Tax Adviser, describing him as ‘evasive’ and displaying ‘a lack of candour’.
In the ruling, the tribunal said: “Overall, we were left with the impression that Mr Lancaster was evasive, providing as little evidence as possible and that he did not wish to volunteer anything more than he considered necessary.
“As a result, it seems to us that the evidence Mr Lancaster gave in his witness statements and orally was confused, lacking in candour, in some respects incorrect and littered with inconsistencies.”
HMRC counter avoidance director Mary Aiston said: “AML Tax used a series of tactics to try and frustrate HMRC’s efforts to work out the tax that was legally due, in a sustained campaign of non-compliance.
“I’m delighted their obstructive conduct has been penalised. HMRC is determined to drive promoters of tax avoidance out of business.”
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