What do Take That, a former 110 metre hurdles world record holder and a TV presenter-cum-Strictly Come Dancing star have in common? Well this time, it’s something definitely less glamorous than a glitzy accolade from the celebrity world of music and sport.
Gary Barlow, Colin Jackson and Gabby Logan have all recently been named and shamed as being involved with Icebreaker, a company which purported to support young musicians but, following a recent court ruling, was found to be an abusive tax avoidance scheme.
Gabby Logan has commented that she invested in the scheme ‘in good faith’ but ‘with new professional help and advisers, I have for some time been working to resolve the issue and I fully intend to pay any tax which should have been paid, had I not entered the business.’
But is this mea culpa enough to restore Ms Logan as the golden girl of sports presenting? Ms Logan may not have considered the reputational risks ensuing from her involvement but all wealthy individuals and their families who seek to undertake legitimate tax planning need to be aware that in the current climate, in which tax planning has become a ‘moral issue’, the reputational and financial risks can be significant, quite apart from the stress and time involved in dealing with the tax authorities.
So when your longstanding financial adviser calls with details of a ‘perfectly legal tax scheme’ designed to save you thousands in tax and has the blessing of tax counsel, what do you do? You have always relied on your financial adviser and have been happy to sign whatever papers he tells you to sign. But in this new world, such reliance probably won’t get you off scot free if things go sour.
You consider the facts: on the financial side, it looks pretty attractive so what else is there to think about? Well, consider the old adage ‘If it sounds too good to be true, it probably is.’ At the very least, you should obtain a second opinion on the legality of the proposals, and whether they might be vulnerable to attack as abusive, from an independent adviser with no personal stake in the arrangement and its success.
But being on the right side of the letter of the law may not be enough to protect you and your family’s reputation. You need to ask yourself the question ‘Would I be able to tolerate this activity being splashed across the press?’ If the answer is no, then walk away. Tax savings may be thousands but reputation is priceless.
On a more practical level, choosing bespoke solutions over ‘schemes’ will reduce the risk of being dragged into the limelight. Making sure that you have the best possible teams of advisers in place with whom you build a longstanding relationship will ensure that you have a voice of reason to act as a sounding board. But at the end of the day, it’s your money, your reputation and your risk. Let the buyer beware.
Emily O’Donnell is an associate at boutique private wealth law firm Maurice Turnor Gardner LLP