Advisers accused of ‘knowing perfectly well’ Icebreaker was tax dodge
Icebreaker was a tax avoidance scheme that created tax losses out of nothing for wealthy people – members of Take That included – which the government said could have cost the taxpayer £120m.
Members of the scheme – which was devised by Caroline Hamilton – claimed to be active partners trading in the creative industries, selling, for example, the rights to a song or an idea for a book.
They claimed tax relief on greater losses than they invested in the partnerships. The return on the partners’ ‘investment’ was the tax relief, which was considerably larger than their cash contribution.
The scheme was rejected by a tax tribunal in May after a case was brought against it by HMRC.
‘Investors’ in Icebreaker are now turning to insurance company Enterprise to pay out on policies it provided in respect of “losses or shortfalls” incurred by those who invested in the scheme.
However Enterprise is refusing to honour the insurance policies, on the grounds that it was deceived by Hamilton and her colleagues into believing that Icebreaker was a genuine investment vehicle, rather than an elaborate scheme designed solely to avoid tax.
In a letter from Ozon Solicitors, which acts on behalf of Enterprise, to one such Icebreaker ‘investor’, the law firm, citing the Tribunal ruling, states that: ‘Participants and their advisors [sic] as well as Ms Hamilton and her colleagues “knew perfectly well” that the gross capital contributions were a “pretence”.’
The letter continues: ‘Given that, in truth, the Icebreaker scheme was designed to make a loss (rather than a profit) as a means of conferring a tax benefit upon participants, it was virtually certain that a loss would be suffered immediately when cover was incepted.
‘Enterprise approached the risk that it was to cover based on…the proposition (albeit mistaken) that the full capital contribution would be invested by participants, and that the proceeds thereof would genuinely be used with a view to profitable trade.
‘Participants misrepresented the facts relating to the circumstances concerning their purported investment and the purpose of their participation in Icebreaker.
‘Enterprise considers that there is no cover under the policy for claims in respect of “losses or shortfalls” incurred by individual “investors”‘.