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Paradise Papers: Lewis Hamilton 'Avoided' VAT On £16.5m Jet Through Isle of Man Deal

Formula 1 champion latest to face allegations over tax havens.

06/11/2017 19:01 GMT | Updated 07/11/2017 12:31 GMT

Lewis Hamilton has ‘avoided’ paying £3.3m in tax by registering his private jet on the Isle of Man, the reports falling out of the so-called Paradise Papers have claimed in the second major bout of revelations.

The allegations surrounding the four time Formula 1 champion and his £16.5m plane are the latest disclosures from millions of documents that have been leaked, exposing how the powerful and wealthy have invested vast sums in offshore tax havens.

On Sunday, the Queen faced a backlash after it was revealed the Duchy of Lancaster, her private estate, was found to have £10m invested in offshore arrangements.

The latest Paradise Papers documents - being trawled over by 100 media groups, including the BBC and The Guardian - show that Hamilton was given a £3.3m VAT refund after his Bombardier Challenger 605 was imported into the Isle of Man in 2013, it is alleged

His advisers appear to have set up an “artificial” leasing deal that did not comply with an EU and UK ban on refunds for private use, the reports said. It may have been entitled to a refund if used for business. The reports suggest that around a third of Hamilton’s journeys were for private trips. 

The Guardian quoted two law professors who reviewed the scheme and described it as potentially “abusive”. In response, Hamilton’s lawyers said a tax barrister review found the structure was lawful and argued it is wrong to say VAT should have been paid on the arrangement.

Legitimate tax avoidance schemes are legal, and there is no suggestion Hamilton was directly involved in creating the scheme used for his jet.

A spokesman for the Mercedes driver said on Monday evening that everything was “above board”.

“If private usage of the jet is being disguised as business usage of the jet, then what you essentially have is a tax avoidance scheme,” Rita De La Feria, professor of tax law at Leeds University, told the BBC.

“You’re using it for your own private interests, you’re going on holidays, meeting friends. You’re supposed to pay the tax on private consumption.”

A spokesman for Hamilton told Press Association Sport: “As a global sportsman who pays tax in a large number of countries, Lewis relies upon a team of professional advisers who manage his affairs.

“Those advisers have assured Lewis that everything is above board and the matter is now in the hands of his lawyers.”

 

READ ALSO: Paradise Papers: 7 Extraordinary Revelations From Massive Tax Haven Leak

The Isle of Man is used regularly by the super-rich to get tax breaks on jets, with customs officials working with accountants to pay almost zero VAT on imports.

Jet owners are able to claim full VAT refunds, if they say that their business is leasing them out. The tiny island has a population of only 83,000, but the second largest jet register in Europe - and is expected to mark its 1,000th aircraft this year.

The full Guardian story is here and full BBC story here.

PA Wire/PA Images
Lewis Hamilton has ‘avoided’ paying £3.3m in tax by registering his private jet on the Isle of Man, reports have claimed

Hamilton has regularly posted pictures of himself and the red plane on hois social media, which appears to provide evidence of personal trips around the world.

Just a kid from the UK that had a dream. #YouCanDoItToo #NeverGiveUp #TeamLH #MegaJet #RoadtoAbuDhabi #AbuDhabiGP

A post shared by Lewis Hamilton (@lewishamilton) on

Hamilton took one of his first trips on the jet at Christmas 2012 holiday in Oahu, Hawaii, with members of his and then girlfriend Nicole Scherzinger’s family.

In July this year, he posted a photo of himself sitting with friends on its steps. “To my loving fans, I can’t wait to see you in Silverstone. Until then, I’m away on a two day break.”

Hamilton left the UK to live in Monaco and then Switzerland in 2007 in order to avoid paying excessive tax in his home country..

This year’s Sunday Times Rich List put his personal wealth at £131 million.

He said when it was published: “I race in 19 different countries, so I earn my money in 20 different places and I pay tax in several different places, and I pay a lot here as well.

“I am contributing to the country and, not only that, I help keep a team of more than 1,000 people employed. I am part of a much bigger picture.” 

The aircraft is now registered to a Hamilton company in the Virgin Islands, which in turn leases it to another in the Isle of Man, which in turn rents it to a screen company in Guernsey.

The stories also allege Hamilton set up another Isle of Man company to buy a £1.5m motorhome that he used at racetracks, and no VAT appears to have been paid.

Meanwhile, Apple actively worked to avoid the implications of a tax crackdown by moving the firm which held most of its untaxed offshore cash reserve to Jersey, the papers reveal. 

The tech giant had used a tax law loophole in Ireland to avoid tens of billions of dollars of taxes but managed to sidestep a crackdown on this in 2013 by hunting for a new tax haven, settling on the Channel Island, the BBC reported.

Jersey does not typically tax corporate income for foreign companies, making it suitable for this.

Documents which have been exposed as part of the so-called Paradise Papers leak revealed that Apple sent a questionnaire to Appleby asking about the various benefits of different offshore jurisdictions, and made it clear that the move was to remain secret.

The company said the new structure had not affected the amount of tax it paid and insisted it remained the largest taxpayer in the world, according to reports.

Earlier, three ‘Mrs Brown’s Boys’ cast members were named in the leaked documents after allegedly donating upwards of £2 million into a tax-avoidance scheme.

Patrick Houlihan - who plays the titular character’s son Dermot - is one of the three named stars, as are Martin and Fiona Delaney, who play Trevor and Maria Brown in the hit BBC sitcom.

BBC
The three cast members named in the Paradise Papers.

According to the documents, the trio transferred their earnings into off-shore companies in Mauritius, and had them sent back to them as loans, in a bid to avoid paying tax on them. 

Around 13.4 million files are said to have been disclosed, which come one year after the disclosure of the Panama Papers sent shockwaves through the world of business.

The Panama Papers caused a significant international fall-out when they were released in April 2016, even leading to the resignation of Iceland’s prime minister amid protests and the surrounding controversy. 

Two offshore service providers are said to be the source of the material, along with the company registries of 19 tax havens.

Millions of the files come from a single company, Appleby, which offers offshore legal services. Appleby has denied any wrongdoing in relation to the findings from the documents.

The latest revelations follow the first batch of the leaks that were published on Sunday, the most eye-catching claim being that the Queen, through her Duchy of Lancaster private estate, has invested in an array of businesses, including the Britain’s biggest rent-to-own retailer that was recently forced to compensate nearly 250,000 customers for its exploitative behaviour.