The Formula One world champion, Lewis Hamilton, one of the world’s richest sportspeople, avoided paying European taxes on his private jet using an Isle of Man scheme that is to be investigated by HM Revenue and Customs.
The big four accountancy firm EY and Appleby, the law firm at the centre of theParadise Papers leak, helped Hamilton and dozens of other clients set up seemingly artificial leasing businesses through which they rented their own jets from themselves.
Two law professors who reviewed the scheme described it as potentially “abusive”, saying it doesn’t appear to follow European rules. “No one seems to be enforcing the laws that exist,” said Rita de la Feria, chair of tax law at the University of Leeds.
After being challenged by the Guardian, the Isle of Man government has called in the British tax office, which will this month begin a review of 231 tax refunds issued to private jet owners since 2011, in a $1bn VAT giveaway.
Hamilton said he had instructed a senior lawyer to check his arrangements and was told they were lawful. He said his practice was to rely on professional advice, and he was not concerned with day-to-day management of his business.
Legitimate tax avoidance schemes are not illegal. There is no suggestion Hamilton was directly involved in creating the scheme used for his jet. He sought professional advice and followed it.
What experts say, however, is that the scheme created appears to be so artificial that it is open to challenge, that it allowed Hamilton to avoid tax that would otherwise have been due, and that the Manx government did not take the proper steps to collect the VAT owed.
Hamilton appears to have used shell companies in the British Virgin Islands (BVI), the Isle of Man and Guernsey to avoid the entire £3.3m VAT bill triggered when he imported his £16.5m red Bombardier aircraft into England from Canada in 2013. Hamilton set up another Isle of Man company to purchase a €1.7m motorhome that he uses at racetracks. No VAT appears to have been paid on that purchase either. Hamilton denies using shell companies, and says the Manx entities were part of his businesses.
The British racing driver, born and raised in Stevenage, takes numerous steps to shelter his £130m fortune. He is contracted to Mercedes, with whom he secured his fourth world championship last month, via a Guernsey company. He holds a Malta company for image rights, and has lived as a tax exile since 2007, first in Switzerland and now in Monaco.
Files leaked from Appleby suggest as much as £1.1m of the VAT he appears to have reclaimed on his jet should have been paid, along with hundreds of thousands due on the continuing costs of flying the jet.
The Paradise Papers data was obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists in Washington with more than 90 media partners including the Guardian, the New York Times and the BBC.
It shows how Isle of Man customs hosted a private meeting with an EY adviser during which details of the structure were discussed, and agreed to fast-track the paperwork.A fortnight after Hamilton’s advisers approached Apple by, the plane arrived in Europe, landing at Ronaldsway airport in the Isle of Man on 21 January 2013. Turnaround was so rapid that an Appleby officer joked by email that they were “moving forward with the pace of a grand prix!!!”.
When Hamilton landed in the Isle of Man at 6.40am on a rainy Monday, a customs officer was on out-of-hours standby – for a £60 fee – to stamp and sign the import form.Hamilton was not the only passenger. Alongside him in the Challenger 605, painted an unmissable “candy apple” shade with matching red cabin lighting, was his pop star girlfriend, the former Pussycat Dolls singer and X Factor judge Nicole Scherzinger.
Hamilton was not the only passenger. Alongside him in the Challenger 605, painted an unmissable “candy apple” shade with matching red cabin lighting, was his pop star girlfriend, the former Pussycat Dolls singer and X Factor judge Nicole Scherzinger.
The couple, who have since broken up, had used the jet a few weeks earlier for a Christmas break with family in Oahu, Hawaii, and were returning to Europe.
Supervising proceedings at Ronaldsway was Brian Johnson, a director at Appleby’s aviation wing. Having masterminded the creation of the Isle of Man’s private aircraft registry in 2007, Johnson moved to the private sector, putting his air industry contacts to commercial use. When asked to confirm his involvement with the import, Johnson declined to comment.
His job was to ensure a crucial piece of paperwork was issued by Manx customs: the C88A import form. It shows that taxes have been accounted for. Without this, planes cannot circulate freely in and out of European airports. In countries such as France, they risk being impounded unless the owner can prove they have paid import VAT.
At 7.30am, Johnson sent a message from his BlackBerry: “Customs form delivered to aircraft. Clear to go.”
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