A firm that promoted tax avoidance schemes and was run by the billionaire husband of Baroness Mone faces a tax bill of up to £3.3 million after a legal verdict that criticised it for being “evasive” in an HMRC investigation.
AML, which was based on the Isle of Man, was one of the biggest promoters of loan-based tax avoidance schemes, which recruited thousands of contractors, including doctors, social workers, nurses and IT workers, who later received large bills from HMRC.
The firm, which was struck off from the Companies House register in 2019 for failing to file its accounts, was part of the Knox Group owned by Doug Barrowman, the Scottish businessman who is married to Baroness Mone, the lingerie tycoon.
A tax tribunal has ordered the firm to pay a £150,000 penalty for repeatedly refusing to respond to the taxman’s demands that it produce more information about its accounts for the 2014 and 2015 tax years. HMRC had opened an inquiry into the company because it estimates that it owes £3.3 million in tax, which AML denies.
In a verdict at the upper tax tribunal in London, published this week, judges Thomas Scott and Jonathan Cannan aimed particular criticism at Arthur Lancaster, the company director, who gave evidence on AML’s behalf about why it had ignored HMRC’s demands for client data. “We have real concerns as to the reliability of Mr Lancaster’s evidence,” they wrote.
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“The judges added: “Overall, we were left with the impression that Mr Lancaster was evasive, providing as little evidence as possible and that he did not wish to volunteer anything more than he considered necessary.
“As a result, it seems to us that the evidence Mr Lancaster gave in his witness statements and orally was confused, lacking in candour, in some respects incorrect and littered with inconsistencies.”
About 50,000 workers signed up to tax-avoidance schemes that were wrongly marketed by AML and several other firms as being compliant with tax rules. Under the schemes, contractors delegated AML to be in charge of their payroll administration. The contractors’ employers then paid their wages to AML, and AML in turn paid the contractors a small declared salary before giving them the rest of their pay in tax-free loans that were never intended to be repaid. Those who signed up to the schemes have since faced potentially ruinous back tax bills from HMRC, plus penalties.
Mary Aiston, the counter-avoidance director at HMRC, said: “We will not allow companies to simply ignore their legal duty. AML used a series of tactics to try and frustrate HMRC’s efforts to work out the tax that was legally due.”
Knox Group would not comment on the record. However, a source close to Barrowman pointed out that AML Tax UK had now been dissolved and claimed that Barrowman had “ceased to have any involvement with AML prior to the events in this case.”
