Terrance Potter, formerly an accountant at EY, was identified as the architect of the fraud following an investigation by HM Revenue & Customs (HMRC).
Potter devised and sold a number of schemes to wealthy professionals that were, according to HMRC, tax avoidance schemes that exploited legal loopholes.
He set up two partnerships that claimed to have spent £5.7m ($8.6m, €7.9m) on film projects. This created artificial losses that allowed investors to claim back Pay-As-You-Earn (PAYE) tax.
The partnerships declared the losses in their tax return and so did the investors, allowing them to recoup up to £40,000 in tax relief from HMRC, for every £20,000 they had invested.
Neil Williams-Denton, who was an IFA for Greystones Financial Services at the time of his arrest, actively sold and promoted the film schemes to wealthy individuals.
Avoidance to evasion
As the schemes were underpinned by false documents, however, the charges escalated from tax avoidance to tax evasion.
Williams-Denton and Potter were charged with attempting to defraud HMRC of £2.2m.
Potter was found guilty of one charge and pleaded guilty to another at an earlier trial in September and was not present in court on Thursday. The other trial can only now be reported as restrictions had been imposed to prevent prejudicing the jury during the most recent court case.
Williams-Denton and Potter will be sentenced next week. Potter is currently in prison following his sentencing in September.
Pure greed
The majority of the tax refunds were withheld by HMRC and although £500,000 had been paid out initially, this has since been recouped.
Jennie Granger, director general of enforcement and compliance, HMRC, said: “This was pure greed by a dishonest tax agent, a financial adviser, and people who were already wealthy individuals. Those found guilty had no interest in the film industry, or regard for the impact on honest taxpayers.
“While it started with a tax adviser pushing a deeply fraudulent tax scheme, wealthy professionals investing in such schemes should be aware of the pitfalls. Those found guilty believed they were above the law, cheating the system by masking tax fraud as investment in films.”
HMRC is increasingly targeting schemes it believes are aimed at avoiding or evading tax. In March 2014, celebrities including David Beckham and Andrew Lloyd Webber were caught up in a film scheme accused of tax avoidance.
All involved were asked to pay back any tax relief they received.
