David Mellor, chief executive at accountancy firm Crowe Clark Whitehill, said the celebrities, which include Gary Barlow, Michael Caine, and George Michael, should consider how using the scheme may affect their public persona before considering its performance.
“The prime concern for individuals should be how a proposed tax scheme might look, rather than simply how it performs from a purely technical perspective,” he said.
“Now, more than ever before, people need to realise the value of being seen to be good citizens. Many public figures do a lot for charity, for example, David Beckham donating his wages to French childrens’ charities, however all the hard work can easily be undone.”
He added that investors should take a broader view of the public’s perception of their finances: “Reputation is a hard-won asset, but it is easily lost. Even when there is no legal wrong-doing, reputational risk must be managed.
“This may mean a larger tax bill in the short term, but it is a small price to pay to ensure the long-term benefits of avoiding negative, and harmful, publicity.”
His comments follow the revelation that 1,600 people, including celebrities, QCs and doctors, used Liberty to hide their wealth and avoid taxes, after a database was leaked to The Times.
Liberty was a legal tax scheme which generated huge artificial ‘losses’ offshore, which members could then use to avoid tax on other income.
HMRC has been investigating Liberty for more than a decade, and is due to challenge the scheme in court in March next year.
Members of the scheme risk having to pay back the contentious tax generated from the scheme before its trial, under new powers granted to HMRC this month.
Up front
The body will now be allowed to charge tax up front in cases that are similar to those that have already been tried, possibly with interest.
The retrospective powers will also affect investors into Ingenious Media, a film investment company which made allowed investors could offset against other income by making early losses through writing down the costs of films.
Ingenious yesterday sent a letter to its clients saying it was likely that they would be asked to pay back all the tax they saved, with bills possibly being sent out by the end of the month.
It added that time was running out to make a settlement with HMRC, with could save them up to 40% on their tax bill.
Investors into the scheme include footballer David Beckham and Dame Clara Furse of the Bank of England.
The scheme helped to fund films such as Life of Pi, Avatar and Girl with a Pearl Earring.
HMRC’s retrospective proposals have already faced widespread criticism, with Stephen Coleclough, president of the Chartered Institute of Taxation questioning the body’s newfound “unprecedented executive powers”.
“If this is to proceed, HMRC should issue comprehensive guidance at the same time as the bill is published to show what situations are to be tackled in this way. It should only apply to members of the same scheme or very close variants of it,” he said.
“These emergency measures should not be a permanent state of affairs.”
