Nowhere to hide, even for globally renowned celebrities

11th April 2017

There really is nowhere to hide, even if you are internationally recognised fashion designer, Karen Millen. The fashion icon, who built her empire from a £100 loan, has said she is ‘deeply devastated’ after she was declared bankrupt over an unpaid £6 million tax bill.

Millen, who opened her first shop almost 35 years ago, failed to pay £6 million to HMRC over her involvement in a tax avoidance scheme. She has insisted that her accountants had advised her to use a tax planning scheme, the validity of which was successfully challenged by HMRC in 2010 and blames Kaupthing, the collapsed Icelandic bank that backed the 2004 deal, rather than her own decisions for her current financial woes.

The Financial Crisis

Although Kaupthing had contributed considerably to her riches, Millen and husband Kevin Stanford, whose business interests remained closely linked despite their divorce in 2001, suffered heavy losses after the bank failed during the financial crisis, taking down many of their personal investments with it. Millen and Stanford are among the many who have pursued several legal claims against the estate of Kaupthing in an attempt to recover the tens of millions they lost in Iceland’s financial meltdown.

HMRC cracks down

Millen’s bankruptcy came as HMRC took action against 14 users of tax avoidance schemes who failed to stump up when ordered to pay disputed bills upfront. According to the Financial Times new figures show the tax authority has resorted to measures such as asset seizures, court proceedings and insolvency in a tiny proportion of the 70,000 cases where it has issued “accelerated payment notices” (APNs) since 2014.

More than £3bn of unpaid tax has so far been collected under the APN initiative that was introduced in 2014 as part of an avoidance crackdown. The scheme was specifically designed to remove the advantages of individuals holding on to disputed tax while cases were investigated and litigated.

It’s becoming increasingly hard to get away with tax evasion, whether in the UK or abroad. With governments pursuing new harsher penalties, and a global push towards greater banking transparency agencies placing contractors need to be confident about tax legislation.

If you’re at all unsure about your status, or that of the contractors you’re placing in foreign locations, then ensure you partner with a specialist before it’s too late. With the law changing at a rapid rate in countries around the world, you could be putting yourself at a greater risk than you were aware.

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