“The government intends the venture capital schemes (the EIS, SEIS and VCTs) to be focused on support for companies with high growth potential. The risk to capital condition is a principled approach to reduce opportunities to use the schemes for tax motivated investment. It will enable the government to avoid excluding further specific types of activity, which would risk excluding genuine entrepreneurial businesses.”
“The benefit for the investor is multifaceted because not only do they obtain investments in trading companies which are intended to increase in value (given the company must use the funds for the betterment of its trade). There are also a number of tax reliefs available under the EIS regime, which are often quoted in prospectuses and can be summarised as follows: (a) Income tax relief - provided a qualifying EIS investment is held for three years from the date of issue or three years from commencement of trade if later, an individual with no more than 30% interest in the company can reduce their income tax liability by an amount equal to 30% of the amount invested up to an investment limit of£1,000,000 (i.e. up to£300,000 income tax relief). In practice, a£100 investment would afford the investor the ability to claim EIS income tax relief of£30 . (b) Capital gains tax exemption - provided that EIS relief is granted and not withdrawn by HMRC on qualifying shares, if the shares are disposed of after three years from the date of issue or three years from commencement of trade if later, then no capital gains tax is payable on the disposal of those qualifying shares. (c) Loss Relief – if EIS shares are disposed of at any time at a loss (after taking into account income tax relief) such loss can be offset, in the year of disposal or previous year, against the investor’s capital gains. or income, affording loss relief against income tax or capital gains tax. (d) Capital gains deferral relief - tax on capital gains realised on a different asset can be deferred, where disposal of that asset was less than 36 months before the EIS investment or less than twelve months after it. (e) Inheritance tax - EIS Investments are generally exempt from inheritance tax after two years of holding such investment.” (a) Income tax relief - provided a qualifying EIS investment is held for three years from the date of issue or three years from commencement of trade if later, an individual with no more than 30% interest in the company can reduce their income tax liability by an amount equal to 30% of the amount invested up to an investment limit of£1,000,000 (i.e. up to£300,000 income tax relief). In practice, a£100 investment would afford the investor the ability to claim EIS income tax relief of£30 . (b) Capital gains tax exemption - provided that EIS relief is granted and not withdrawn by HMRC on qualifying shares, if the shares are disposed of after three years from the date of issue or three years from commencement of trade if later, then no capital gains tax is payable on the disposal of those qualifying shares. (c) Loss Relief – if EIS shares are disposed of at any time at a loss (after taking into account income tax relief) such loss can be offset, in the year of disposal or previous year, against the investor’s capital gains. or income, affording loss relief against income tax or capital gains tax. (d) Capital gains deferral relief - tax on capital gains realised on a different asset can be deferred, where disposal of that asset was less than 36 months before the EIS investment or less than twelve months after it. (e) Inheritance tax - EIS Investments are generally exempt from inheritance tax after two years of holding such investment.”
“The Super EIS is unlike a standard EIS in that there is loan facility provided by a specialist bank, which allows you to claim relief on a gross investment that is approximately five times your net cash outlay; this effectively super-charges your tax relief. One of the reasons why the ultimate investment return from a Super EIS is unlikely to be particularly high is because the profits on the transaction are used to repay the loan (together with the majority of the interest and charges) before any surplus can be distributed to you, the investor. The loan will be repaid from the proceeds of the sale of the Super EIS Company's underlying assets/rights. If for any reason these do not yield sufficient proceeds the guarantor will cover the repayment (in other words, you could not be called upon by the bank to pay them any additional funds).”
“16.1 each Claimant would use their own personal funds to make an EIS Investment in an Investee Company, with the same terms as described above in relation to “standalone”
“21.2 Each relevant Claimant who was making a FRB Investment would agree to enter into an Assignment of Film Rights Deed (“Film Rights Assignment”) with Film Rights Exchange Limited (“FRE”), a limited company incorporated in Guernsey for the assignment of certain film rights (“Film Rights”) to the Claimant; 21.3 The consideration payable for the assignment of the Film Rights would be funded from two sources (a) personal funds to be provided by the Claimant (the “Personal FRB Investment”); and (b) funds provided pursuant to the Claimant pursuant to a loan to be provided to the Claimant with the Amorone Bank (the “Loan FRB Investment”). From the information brochure, it appears that the intention was that a quarter of the funds for the acquisition of the Film Rights were to be provided from personal funds available to the Claimant, with three quarters of the funds to be provided from the proceeds of the FRB Loan... 21.4 Each Claimant would then acquire the relevant Film Rights. The intention was that each Claimant would, in relation to the acquired Film Rights, carry on a trade of producing and distributing the relevant film as a sole trader (“Film Rights Trade”). The example calculations set out in the information brochure in relation to the FRB Business suggest that the Claimant would, in the accounts of their Film Rights Trade, immediately claim an 85% write-down in the value of the Film Rights. The calculation suggests that the amount of this write-down would be available as a deduction in calculating the profits of the Film Rights Trade for income tax purposes.”
“The Policyholder shall as soon as reasonably practicable during the Policy Period notify the Insurer at the address listed in the Claims Notifications clause below of any circumstance of which any Insured becomes aware during the Policy Period which is reasonably expected to give rise to a Claim. The notice must include at least the following: (i) a statement that it is intended to serve as a notice of a circumstance of which an Insured has become aware which is reasonably expected to give rise to a Claim; (ii) the reasons for anticipating that Claim (including full particulars as to the nature and date(s) of the potential Wrongful Act(s)); (iii) the identity of any potential claimant(s); (iv) the identity of any Insured involved in such circumstance; and (v) the date on and manner in which an Insured first became aware of such circumstance. Provided that notice has been given in accordance with the requirements of this clause, any later Claim arising out of such notified circumstance (and any Related Claims) shall be deemed to be made at the date when the circumstance was first notified to the Insurer. See D/1/10. ” (i) a statement that it is intended to serve as a notice of a circumstance of which an Insured has become aware which is reasonably expected to give rise to a Claim; (ii) the reasons for anticipating that Claim (including full particulars as to the nature and date(s) of the potential Wrongful Act(s)); (iii) the identity of any potential claimant(s); (iv) the identity of any Insured involved in such circumstance; and (v) the date on and manner in which an Insured first became aware of such circumstance. (2) By the Schedule to the Policy, liability for “any one claim” is limited to£2,000,000 . Defence costs are payable in addition. In respect of all Claims relating to Tax Mitigation Schemes, the following Limit of Liability shall apply: Limit of Liability (all Claims in the aggregate, Defence Costs in addition). Limit of Liability (i) The total amount payable by the Insurer under this policy for all Claims in the aggregate during the Policy Period shall not exceed the Limit of Liability. (ii) Sub-limits of liability and Extensions are part of that amount and are not payable in addition to the Limit of Liability. (iii) Each sub-limit of liability set forth in the policy is the most the Insurer will pay in the aggregate under this policy as Loss in respect of any insurance cover or extension to which it applies. (iv) Defence Costs are payable in addition to the Limit of Liability. In the event that this policy’s Limit of Liability is insufficient to cover the amount paid by or on behalf of any Insured to dispose of a Claim (exclusive of Defence Costs), then this policy shall only cover the same proportion of Defence Costs as this policy’s Limit of Liability bears to the total amount paid to dispose of the Claim (exclusive of Defence Costs). (v) The inclusion of more than one Insured under this policy does not operate to increase the total amount payable by the Insurer under this policy. (vi) The Limit of Liability is the total sum payable by the Insurer. Any sum paid by the Insurer under this policy shall erode the Limit of Liability. In no circumstances shall the liability of the Insurer exceed the Limit of Liability. The following Definition is added to this policy: - offshore trusts - film/finance /film production partnership schemes - stamp duty land tax (SDLT) - employee benefit trusts (EBTs) - VAT artificial leasing - finance retired benefit schemes (FURBS). - employer finance retired benefit schemes (EFRBS). - enterprise management incentives (EMI) - enterprise investment schemes (EIS) - pension liberation schemes All other terms conditions and exclusions remain unchanged. See D/1/17. ” (4) The “limit of liability” in the schedule to the policy is£2 million and the general provision in the policy is that “the total amount payable by the insurer under this policy (excluding Defence Costs) for any one Claim during the Policy Period shall not exceed the limit of Liability.”
“If during the Policy Period a Claim is made or a circumstance is notified in accordance with the requirements of this policy any Related Claim made after expiry of the Policy Period will be accepted by the Insurer as having been: (i) made at the same time as the notified Claim was made or the relevant circumstance was notified, and (ii) notified at the same time as the notified Claim or circumstance. All Related Claims shall be deemed to be one single Claim and deemed to be made at the date of the first Claim of the series or at the first circumstance notified, whichever is first. See D/1/12. ” (1) “Claim means any: (i) written or oral demand for compensation in respect of a Wrongful Act of an Insured…. At D/1/5 ” and (2) “Wrongful Act means any actual or alleged act, error or omission committed solely in the performance of or failure to perform Professional Services At D/1/8. .”
“If during the Period of Insurance the Insured becomes aware of any circumstance which may give rise to a Claim, the Insured shall give notice in writing of such circumstance to Insurers as soon as reasonably practicable and in any event not later than the last day of the Period of Insurance. Any Claim arising from such circumstance shall be deemed to have been first made in the Period of Insurance.”
“(1) The claims as pleaded include Seed EIS Investments and investments in Ober Private Clients Limited. (2) [White & Co] was aware that it had advised its clients in respect of each the Investments and that there may be claims by any such client. Crucially, allegations had already been made as to alleged negligent tax and investment advice, which [White & Co] would know could have been similarly applicable to any other client receiving similar advice. (3) A reasonable person, with all the background knowledge which would reasonably have been available to Allianz, would have understood the notifications to be notifications of circumstances to the effect that there may be claims by any of [White & Co’s] clients on a similar basis to the allegations that had already been made as to alleged negligent tax and investment advice. By way of example, the First November 2017 Email notes that Mr Levy, “is also still actively seeking to recruit further potential Claimants, though no further individuals have been named specifically at this stage.”
“that it may be claimed by individuals or entities advised by [White & Co] in respect of investments relating to EIS Investments and/or SEIS Investments and/or FRB Investments and/or Bond Investments and/or DJI Investments and/or similar investments that the advice was negligent. The said circumstances related to: (1) Investments in the companies listed in the Akbar Letters; (2) Investments in EIS Investments and/or SEIS Investments and/or FRB Investments being the types of investments expressly mentioned (3) (By virtue of [White & Co’s] advice in respect of the companies referred to in the Akbar Letters being typical of [White & Co’s] advice in respect of other companies) the said circumstances also related to any similar investments in which [White & Co] gave similar advice; and. (4) Any Bond Investments and/or DJI Investments which had been the subject of similar advice (including similar representations as to Mr White’s expertise and track record).”
“By virtue of the Block Notification, [White & Co] was aware of circumstances that may give rise to a “Claim” within the meaning of the 2016 Minimum Terms; namely that the First Defendant had advised clients in respect of enterprise investment schemes (being the EIS Investments and the SEIS Investments) and/or FRB Investments and/or Bond Investments and/or DJI Investments and that such advice may have been negligent. The said circumstances relate to: (1) The EIS Investments and SEIS Investments which were identified in the Block Notification; (2) Any similar EIS Investments and SEIS Investments being the types of investments expressly mentioned and/or which had been the subject of similar advice. (3) Any Bond Investments and/or DJI Investments which had been the subject of similar advice (including similar representations as to Mr White’s expertise and track record).”
“circumstances that may give rise to a claim; namely, that it may be claimed by clients or former clients that its advice in respect of investments relating to EIS Investments and/or SEIS Investments and/or Bond Investments and/or FRB Investments and/or Bond Investments and/or DJI Investments and/or similar investments was negligent. Although the First Defendant was not itself a party to the correspondence constituting the Kennedys Documents, it is to be inferred that the First Defendant received copies of the same by virtue of Kennedys acting as the First Defendant’s solicitor. For the avoidance of doubt, the said circumstances related to: (1) Investments in the companies listed in the Kennedys Documents; (2) Investments in EIS Investments and/or SEIS Investments and/or FRB Investments and/or Bond Investments, being the types of investments expressly mentioned; (3) (By virtue of the First Defendant’s advice in respect of the companies referred to in the Kennedys Documents being typical of the First Defendant’s advice in respect of other companies) any similar investments in which the First Defendant gave similar advice; (4) Advice in respect of Investments given by the First Defendant to the individuals or entities listed on the Spreadsheet under the sheet titled “Shareholders;” and (5) Any Bond Investments and/or DJI Investments which had been the subject of similar advice (including similar representations as to Mr White’s expertise and track record).” (2) Investments in EIS Investments and/or SEIS Investments and/or FRB Investments and/or Bond Investments, being the types of investments expressly mentioned; (3) (By virtue of the First Defendant’s advice in respect of the companies referred to in the Kennedys Documents being typical of the First Defendant’s advice in respect of other companies) any similar investments in which the First Defendant gave similar advice; (4) Advice in respect of Investments given by the First Defendant to the individuals or entities listed on the Spreadsheet under the sheet titled “Shareholders;” and (5) Any Bond Investments and/or DJI Investments which had been the subject of similar advice (including similar representations as to Mr White’s expertise and track record).”
“In my judgment, the key point arising from these authorities is that in both cases the notifications were held to be valid in relation to later claims that arose from the circumstances notified, even though the notification had not even referred to the transaction from which the later claim arose, let alone identified a defect in relation to the handling of that particular client as likely to give rise to a claim by that client. In Rothschilds the Court clearly rejected the view expressed by the underwriter's initial response to JRA that the notification was premature and that JRA must instead notify only once it had identified a possible defect in a specific case. On the contrary, the Court, having found that there was a sufficient factual basis to amount to a 'circumstance', held that the notification covered not only transfers out of pensions but also opt out advice, despite the fact that JRA had not even been able to list the clients to whom opt out advice had been given. Similarly in Kidsons there was no suggestion either in the judgment of Gloster J or in the judgment of the Court of Appeal that the notification was ineffective because it failed to identify particular clients to whom the tax avoidance products had been sold or to examine whether that particular client might have a claim. The assumption was that provided circumstances exist which may give rise to a claim, and provided those circumstances are notified, then any future claim arising out of those circumstances must be paid out by the insurer at risk at the time of notification whether or not the particular transaction or possible claimant has been identified at the time of notification.” (5) Where proper notification of circumstances is given, any claim arising out of the notified circumstances will be considered to have been made within the requisite period of insurance but there must be a causal (rather than coincidental) link between the notified circumstances and the later claim – see Euro Pools at [39(v)]. This can include new damage flowing from the notified circumstances even if after the policy period providing it arises from the notified circumstances. In Kajima UK Engineering Ltd v The Underwriter Insurance Company Ltd[2008] EWHC 83 (TCC) , (“Kajima”), Akenhead J put it thus at [99(i) & (j)]: “(i) The claim which is later pursued must arise not only from the notified circumstances but also only from the circumstances of which the Insured was aware. It can not arise from any other circumstances which may have happened or been discovered either after the notification or in any event after the expiry of the insurance cover. Put another way, a subsequent claim which relates to matters of which the Insured was not aware at the time of the notification would not and could not arise from the notified circumstances and, to that extent, would not be covered by the policy. (j) The claim subsequently brought can relate to new damage flowing from or consequences of the properly notified circumstances which had not occurred by the time of the expiry of the insurance cover because the claim would arise from the notified circumstances.” (6) Conventional principles of interpretation are to be applied when construing a communication to determining whether it is a notification and, if so, its scope – see Euro Pools at [39(vi)]. As Akenhead J put it in Kajima at [99]: “(g) One must construe any notification objectively but one is entitled to review subjectively what the Insured was aware of with regard to the notified circumstances. It matters not in this case because the Insured did notify expressly in words the circumstances of which it was aware. (h) I do not consider it helpful to talk in terms of a narrow or broad interpretation of the notification. It will be interpreted objectively on the basis of the words used, having regard to the factual context in which it was served. The factual context is important, not only as a matter of interpretation of the notification but also, because it is only matters of which the insured is aware that can form the basis of a valid notification.”
“By whom must notice be given? Most notification of loss clauses specify that notice must be given by the assured. It is nevertheless arguable that such wording is adopted simply because the assured will normally be the appropriate person to give notice, and that the insurers’ intention is not to impose a personal obligation on the assured. It was thus held in Lickiss v Milestone Motor Policies at Lloyd’s that the assured’s obligation under a motor policy to notify the insurer of any accident and of any notice of intended prosecution served on him by the police, had been satisfied where the relevant information had been provided to the insurer by the victim’s insurers and the police. In the view of Lord Denning, “law never compels a person to do that which is useless and unnecessary.”
“Thank you for your email of5 April 2017 with details of this new notification. I have noted this against the Insured’s 2016/2017 policy but will need further information in order to confirm formal acceptance…. I note that the Insured acted for the 8 individuals noted in [the March Letter]. I understand each of them wishes to bring a claim. Until we know more details about the claims I am unable to confirm how many claims (as defined by the policy) are being made. The letter received from Elite is vague and makes a range of allegations without providing any substantive evidence for such claims.”
“While it would appear that the appropriate course of action would be to reply along the lines set out in the recent email, I would be grateful for any comments you may have in this instance.”
“You have received full information to notify your client that something is seriously amiss. • Your client through Mr White advised my clients that the investments that he advised would allow them to obtain tax benefits. • He has stated that the tax benefit would be immediate. • The tax benefits did not materialise. • My clients have been subject to great expense in resolving their tax issues. Your client is fully aware of this. • Your client through Mr White has stated that the investments that he recommended would be sound and good investments. … “The practice of your client bears all the hallmarks of an attempt to gain tax benefits for the investors and the companies in which they invest, but in a manner which is not legally possible for the investors.”
“The Claimants claim damages and losses resulting from and ancillary to making various investments under various “schemes” pursuant to the Defendants’ misrepresentations, negligent mis-statement and/or culpably bad advice, being advice given by the Defendant in breach of their common law, contractual and/or fiduciary duties and/or professional duties.”
“We have been instructed by the above named to advise in relation to an HMRC enquiry. Please accept this letter as notification of potential claims in compliance with the terms of the policies. The following information is supplied to address the requirements at page 10 and the heading “Circumstances” in the policy document. (i) The client companies advise and assist their own clients in the submission of applications to HMRC for tax relief under the government’s Enterprise Investment Scheme. Once a particular application is authorised, tax relief may be claimed for the relevant period. HMRC question whether our client was correct when advising that relief may be claimed before formal authorisation is given. It is said that even though the applications were likely to be granted, the applicants obtained tax relief from an earlier point, thereby committing an offence attracting a penalty. Our clients do not accept HMRC’s interpretation of accepted practice and procedure on this point and seek advice on how they might defend or mitigate against the HMRC penalties now applied to a number of applicants. The cases under investigation are those where McKenzie Knight and Partners Ltd advised. Cases involving advice provided by White and Company (UK) Ltd may be investigated in due course. (ii) Our clients have received correspondence from applicants who are now obliged to pay HMRC penalties, including interest, even though they may ultimately be entitled to the tax relief. The applicants ask our clients to indemnify them in respect of the penalties, interest and potential related loss. Further investigation will be required to identify the full scope of the claims. (iii) The number of potential claims by complainant applicants is under consideration, but the sums involved may exceed the stated excess in each policy. The identity of each claimant can be provided in the course of determining quantum. (iv) The identity of any insured for the purposes of the claims will be – McKenzie Knight and Partners Ltd, White and Company (UK) Ltd, Ben White and Emma Abbott.”
“We met with the directors on 2nd June to discuss developments, Ben White in particular has been liaising with investors and is now confident that those who originally notified their intention to claim compensation from White and Co/McKenzie Knight are happy for our clients to speak with HMRC on their behalf to find a solution. Our clients say that there has been no dishonesty on their part. They acted in good faith when advising investors that they could claim tax relief before receiving formal authority from HMRC, who take issue with the timing of the claims, not the eligibility for tax relief itself. Consequently, our clients wish to speak with HMRC to determine whether it was reasonable for them to impose financial penalties on investors in respect of claims where the investor obtained tax relief earlier than they were entitled to obtain it. Our clients say that whilst some inspectors were content to postpone enforcement action pending receipt of the EIS3 (the formal authority), other inspectors proceeded to impose penalties. Our clients are in the process of arranging a meeting with the inspector conducting the investigation and it is proposed that we attend the meeting to advise on how enforcement might be avoided or limited. This will have an impact on how we answer the questions in your email 1st June. I stress that no admissions will be made during that meeting. We regard it as a meeting at which we may clarify HMRC’s position and advise on the level of risk faced by our clients and the insurer.”
“Re: White & Company Ltd – EIS Investments (New Notification).”
“the queries raised in your email dated01 June 2017 are helpful and I await sight of the documents requested before considering policy response.”
“At the current date the clients affected solely relate to [MKP] clients, accordingly no details have been provided for White & Company as we consider no notification is required.”
“I have not heard from you since our conversation of 12 June. I am continuing to gather information concerning the investment made by my clients. In the interim, please provide full details regarding the film rights acquired by my clients on the following dates.” [Information as to the clients, amount invested and dates is then given] “At this stage, please provide details of the film and the relevant territory in each case.”
“Please find below my response to the allegation of defamation… Please note that all statements made by me to which you refer have come either from my discussions with clients in the course of privileged professional dealings, witnesses who have been identified as a result of investigation and who have chosen to contact me in response to letters written to them, and as a result of examination of documents in the public domain. I have sought comments from other investors. I have had several who have shared the same experiences of loss. I have had none that have disagreed… The analysis of the records on Companies House produces the following summary of companies that we have identified have been the subject of recommendations by White & Co as sound investments. Number of Companies 77 Companies showing a profit 3 Companies showing a loss 43 Of those companies showing a profit, number where debtors are greater than profits. 3 No Accounts Yet 31 Total lost£36,708,804.00 Debtors£26,245,157.00 This contrasts markedly with supposedly independent reports that would seem to indicate that White & Co has a track record of advising on sound investments. Having looked into the directors of those companies, those who figure most prominently have unenviable track records of several directorships of companies that lose money repeatedly … I must conclude that no due diligence was taken whatsoever into the companies or into the history of the directors with disastrous results for my clients and for others.”
“Aggregation clauses have been a long-standing feature of professional indemnity policies, and there have been many variants. Because such clauses have the capacity in some cases to operate in favour of the insurer (by capping the total sum insured), and in other cases to operate in favour of the insured (by capping the amount deductible per claim), they are not to be approached with a predisposition towards either a broad or a narrow interpretation.”
“Issue 1: Do the Liability Claims or any of them arise from professional services provided by an entity other than White & Co and consequently fall outside the scope of the Allianz Policy? It is agreed that this Issue falls for determination as part of the Liability Trial. Issue 3(3), 8: Bond/DJI Investments It was conceded by the Claimants that claims relating to these types of investments do not arise from notified circumstances and so no longer form any part of the claims. Issues 4 and 7: 24 April Letter It was conceded by the Claimants that they no longer rely on the 24 April Letter on the basis that it does not add materially to the Akbar Letters. However, the Claimants continue to rely on it as a document said to contribute to White & Co’s awareness. Issues 15, 16, 19: July Letter So far as these issues refer to the July Letter, the Claimants conceded that it does not materially add to awareness or notification and no determinations are sought in respect of it. Issues 14, 15, 16, 17, 19: the Spreadsheet So far as these issues refer to the Spreadsheet, the Claimants have accepted that the Spreadsheet which Mr Levy says was referred to at his meeting with Kennedys on21 November 2017 is not capable of being a notification to Allianz. It therefore falls away as a point for determination on these issues, and Issues 14, 15 and 19 fall away entirely. Issues 22 and 23: Cumulative awareness and notification The Claimants conceded that the cumulative awareness set out at paragraphs 35.7.0 to 35.7.2 of the Re-Amended Particulars of Claim do not constitute a separate notification of circumstances in their own right. Accordingly Issues 22 and 23 fall away. However, the Claimants’ case is that the factual matrix for the proper construction of each notification ought to include the contents of any previous notifications. Issue 27: Where a Claimant received advice and/or information from both White & Co and Ober or alternatively, advice or information from Ober which communicated advice or information from White & Co, or advice from MKP, do claims arising from the said advice fall within the scope of the Ober Exclusion? The parties agree that Issue 27, like Issue 1, is better determined as part of the Liability Trial. Issue 28: Is the Allocation Clause contrary to the Minimum Approved Wording in the Allianz Policy? The parties agree that, if Issue 28 arises, it is better determined as part of the Liability Trial. Issue 29: Where a Claimant received advice and/or information from both White & Co and another entity what allocation should be made between Allianz and that other entity? The parties agree that Issue 29, like Issues 1 and 27, is better determined as part of the Liability Trial. What constitutes a Claim? The parties agree that this issue (insofar as it arises) is better determined as part of the Liability Trial. Issues 33 and 34: Can Allianz rely on the Retention provision in the Allianz Policy or is it inconsistent with paragraph C13 of the 2016 Minimum Terms? How should the Retention be applied given the Court’s findings in relation to Related Claims and/or the Tax Mitigation Endorsement? The parties agree that Allianz can in principle rely on the Retention clause in the Allianz Policy, and that a retention of£10,000 per Claim (as defined) is applicable, up to a maximum of£60,000 .”
“…in this context a transaction is "artificial" if it has, as compared with normal transactions of an ostensibly similar type, features that are abnormal and appear to be part of a plan. They are the sort of features of which a well-informed bystander might say, "This simply would not happen in the real world." Recognising a transaction as artificial in this sense is an evaluative exercise calling for legal experience and judgment. It is certainly not an ordinary question of primary fact…”
“It does not appear that any of the companies mentioned above have ever traded. It would appear from the records that most if not all of my clients' investments have not been recorded on the company documents. It would appear that the companies have been formed purely for the purpose of receiving investment money with no intention of trading. In several of the instances money has been solicited from my clients immediately before application for the winding up of the company or the conclusion of any activity whatsoever of the company when it was not possible that the officers of the company including Mr White had any belief that the company was viable or likely to trade.” (3) The exhibits to the Levy Witness Statement are said to reveal that White & Co was advising other investors, not just the Akbar Claimants. This can be seen for example in the list of shareholders of Vintage Seeker Ltd, a company referred to in the March Letter, at D/9/10 which contains the names of people whose contact details are shown as “C/o White & Co” but who are not amongst the Initial Akbar Claimants. (4) The notifications were not restricted to the Akbar Claimants and so could relate to any client investing in the same type of investments as the Akbar Letters Companies who received similar advice. (5) Allianz comments in the email of10 April 2017 that, “Until we know more details about the claims I am unable to confirm how many Claims (as defined by the Policy) are being made.” (6) As Mr Chapman KC said in oral closing submissions, the Akbar Letters show that ”there is a serious problem with the structure of these investments.”
“The hallmark of tax avoidance is that the taxpayer reduces his liability to tax without incurring the economic consequences that Parliament intended to be suffered by any taxpayer qualifying for such reduction in his tax liability. The hallmark of tax mitigation on the other hand is that the taxpayer takes advantage of a fiscally attractive option afforded to him by the tax legislation, and genuinely suffers the economic consequences that Parliament intended to be suffered by those taking advantage of the option. Where the taxpayer’s chosen course is seen upon examination to involve tax avoidance (as opposed to tax mitigation), it follows that tax avoidance must be at least one of the taxpayer’s purposes in adopting that course, whether or not the taxpayer has formed the subject motive of avoiding tax.”
“[124] … For present purposes “object” can also be regarded as synonymous with purpose. So far as relevant to this case, and gathering the points together, I would summarise the key points as follows: a) Save in “obvious” cases, ascertaining the object or purpose of something involves an inquiry into the subjective intentions of the relevant actor. b) Object or purpose must be distinguished from effect. Effects or consequences, even if inevitable, are not necessarily the same as objects or purposes. c) Subjective intentions are not limited to conscious motives. d) Further, motives are not necessarily the same as objects or purposes. e) ‘Some’ results or consequences are ‘so inevitably and inextricably involved’ in an activity that, unless they are merely incidental, they must be a purpose for it. f) It is for the fact finding tribunal to determine the object or purpose sought to be achieved, and that question is not answered simply by asking the decision maker.” a) Save in “obvious” cases, ascertaining the object or purpose of something involves an inquiry into the subjective intentions of the relevant actor. b) Object or purpose must be distinguished from effect. Effects or consequences, even if inevitable, are not necessarily the same as objects or purposes. e) ‘Some’ results or consequences are ‘so inevitably and inextricably involved’ in an activity that, unless they are merely incidental, they must be a purpose for it. f) It is for the fact finding tribunal to determine the object or purpose sought to be achieved, and that question is not answered simply by asking the decision maker.”
“Tax avoidance involves bending the rules of the tax system to try to gain a tax advantage that Parliament never intended… It often involves contrived, artificial transactions that serve little or no purpose other than to produce this advantage. It involves operating within the letter, but not the spirit, of the law.” (b) In Scotland, there is a general anti-avoidance rule (as opposed to an anti-abuse rule) which “has effect for the purpose of counteracting tax advantages arising from tax avoidance arrangements that are artificial”
“Q: You say at paragraph 27, ‘The first investments that we made were in film rights. We were told by Ben White that as long as we involved ourselves in the film business in the way that he recommended, we would be considered film producers by HMRC and entitled to the tax reliefs that he advised.’ If we go on then to paragraph 29: ‘I was told by BW [Ben White] that by me being a producer and trader, this investment was eligible for tax relief’. If we just pause there, a producer and a trader. My understanding, and let's see if we agree on this, is that a film producer is somebody who oversees film production? A:Correct. Q:Somebody who in pre-production finds material for development, gets the scriptwriter, hires a director; yes? A:Yes. Q. Somebody who at the production stage ensures that the film remains on schedule and on budget? A.Yes. Q.And then after production, deals with sales, marketing, distribution, all of those kind of things; yes? A.Yes. Q.A film trader, I have to say I am not entirely sure what a film trader does. Perhaps you can enlighten me? A. Presumably sells the film, the film rights. But from the definition of HMRC, their definition for the producer was as long as they're involved with the production or the films, 10 hours a week, 360 hours a year, then it counts as being a producer. Q.Mr Burn, we established at the outset that you and your wife were an orthodontist and a dentist respectively yes? A.Yes, that's correct. Q.And that you certainly, I didn't ask about your wife, but you were certainly practising full-time; yes? A.Yes. Q.You weren't actually engaging in film trading or production, were you? A. Well, I mean, at Cannes we met Maggie Monteith, this was the producer of the films. We sat down and talked through the tranche of films that were on offer and that we'd be involved with. They changed over time and you could -- you got information and feedback as to how the films were doing and the scripts. Then, yes, in Toronto, we attended the film festival in Toronto and met representative Maggie Monteith in Toronto. Q.You say at paragraph 29 of your statement: "I was told that by acting as a film producer and undertaking a statutory number of hours per year that this would qualify for tax relief. Ben White gave advice to keep a diary of our film production activities. We did this diligently and attended film festivals in Cannes and Toronto and followed all the advice that Ben White had told us would render us legitimate film producers." So you have just listed off some things that you did. You met Maggie Monteith? A.Yes. Q.You got information and feedback as to how the films were doing, yes, but you couldn't impact how the films were doing, could you. A.Well, I couldn't impact on them, no. Q.You were just having a chat. You were just having a chat so that you could write in your diary that you'd done some work on a film, weren't you? A.I certainly wasn't having an impact on the script or the film. Q. No. You weren't sourcing a scriptwriter? A. No. Q.You weren't looking at the production budget? You didn't have any say over who the director was? A. No. Q. Nobody was asking for your opinion on where this film should be marketed, were they? A. No. Q. No. What you were doing was you were in Cannes and Toronto to give the impression that you were engaging in film production, weren't you, Mr Burn, if we're being honest? A.Also to actually meet Maggie Monteith because he had said that Maggie Monteith was the film production… did she exist – Q. Mr Burn, if I meet Steven Spielberg, I'm not engaged in film production, am I? A.Well, I was meeting Maggie Monteith who was the film producer – Q. If I meet Steven Spielberg and I ask him how his latest film is going and what the budget is, I'm not engaged in film trading and production, am I? A. No, okay. Q. So let's call a spade a spade: you were going there to give the impression of being a producer and trader, but you were not in fact a producer and trader, were you? A. I was not, from the classical sense of producer, no.”
“The relevant shares must be subscribed for by the investor for genuine commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the sole purpose of not paying tax.”