An accountant and an independent financial advisor have been jailed for 8 and 6 years, respectively, for attempting to steal £2.2 million in a tax fraud linked to the film industry, following a ground breaking investigation by HMRC.
An HM Revenue and Customs (HMRC) investigation revealed that accountant Terence Potter, 55, devised and promoted, jointly with Neil Williams –Denton, a number of fraudulent schemes to wealthy professionals, which were portrayed to HMRC as being tax avoidance schemes exploiting legal loopholes. However, the bogus schemes were fraudulently underpinned by false documents, making them tax evasion.
Potter set up two partnerships that were sold to the wealthy investors. One produced a film called 'Starsuckers', the other was a project to develop a package to be made into a film by others called 'Mercedes the Movie'. Together both partnerships claimed to have spent £5.7 million on the projects. This created artificial losses that allowed the investors to claim back PAYE tax they had paid.
The partnership declared the losses in its tax return and so did the investors, which would have allowed them to recoup up to £40,000 in tax relief from HMRC, for every £20,000 they had invested. However, as the scheme was illegal their claim for tax relief was false. The claims were supported by false documents produced by Potter.
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.
“Ground-breaking work from our expert investigators uncovered the full extent of the fraud, and this verdict shows that those who engage in this sort of activity are not beyond our reach. The message for anyone thinking of joining such a scheme is think again: if it sounds too good to be true, it is. Get independent tax advice and stay on the right side of the law.”
In a previous trial, which can only now be reported as restrictions have been lifted, three investment bankers, James Hyde, Phillip Jenkins and Hamish MacLellan were sentenced for taking part in the fraud. Their trial took place in September 2015 and all three received custodial sentences.
HMRC has been working with the tax profession to tackle those who promote tax avoidance schemes. Promoters of Tax Avoidance Schemes legislation, introduced by Parliament in 2014, is aimed at tackling those who push the boundaries of the rules, and carries consequences for those who fail to change their behaviour.
Over 100 officers from HMRC took part in the operation that led to the arrests in February 2012. Eighteen properties were searched and computers, business records and mobile phones were seized.
The majority of the tax refunds were withheld by HMRC and although £500,000 had been paid out initially, this has since been recouped by HMRC.
Investigations to recover further proceeds of the crime are underway.
Notes for editors
1. Reporting restrictions had been placed on all trials but were lifted last Thursday, 10 December 2015
2. Photographs of the defendants are available on request or from HMRC's Flickr channel: www.flickr.com/hmrcgovuk
3. Details of the defendants sentenced at Southwark Crown Court:
- Terence Sefton Potter, DOB 24/01/60 of HM Prison Service, formerly of Balmoral Park, Singapore, and before that of Monaco, was found guilty of one charge in September and pleaded guilty to another matter. Potter was an accountant and tax specialist and a former partner in Ernst & Young and although involved in film productions was principally a promoter of tax avoidance and evasion schemes. He has been sentenced to 8 years on all 4 counts concurrent.
- Neil Williams Denton, DOB 17/07/73 of Greenmount Bolton, Greater Manchester, was an Independent Financial Advisor for Greystones Financial Services at the time of his arrest. He actively ‘sold’ and promoted Potter’s schemes to wealthy individuals. Sentenced to 6 years on two counts concurrent.
4. Details of those sentenced on 18 September 2015 in Trial 2 at Southwark Crown Court:
- James Hyde, DOB 29/10/72 of HM Prison Service and formerly of Grove Farm, Ivinghoe Aston, Buckinghamshire, was found guilty and sentenced to four and a half years in prison.Hyde was an investment banker working for Jeffries International at the time of his arrest and invested almost £100,000 in the scheme.
- Phillip Jenkins, DOB 04/06/65 of HM Prison Service and formerly of Ketches Lane, Sheffield Park, Uckfield, Sussex, was found guilty and sentenced to four and a half years in prison.Jenkins was an investment banker working for Jeffries International at the time of his arrest and invested almost £100,000 in the scheme.
- Hamish MacLellan, DOB 10/10/72 of HM Prison Service and formerly South Hill Park, London, NW3, was found guilty and sentenced to four and a half years in prison.MacLellan was an investment banker working for Jeffries International at the time of his arrest and invested almost £100,000 in the scheme.
All five defendants were charged with Conspiracy to Cheat the Public Revenue.
5. Follow HMRC on Twitter @HMRCgovuk
6. HMRC's Flickr channel: http://www.flickr.com/hmrc.gov.uk.
Issued by HM Revenue & Customs Press Office
HM Revenue & Customs (HMRC) is the UK’s tax authority.
HMRC is responsible for making sure that the money is available to fund the UK’s public services and for helping families and individuals with targeted financial support.