Ecclestone's overseas trusts fraud case passes the ex-chequered flag

The former Formula One boss Bernie Ecclestone was, on 12 October, sentenced to 17 months in prison, suspended for two years, on top of a record civil settlement of £652m after the 92 year old businessman stepped up to the podium to plead guilty to misleading HMRC regarding his overseas tax position, particularly interests in overseas trusts, say Edwin Coe tax team Sean Bannister and tax assistant Henry Hinton in a blog on 18 October.  

The charge of fraud stemmed from allegations that Ecclestone faced in July 2015. Ecclestone had falsely claimed that he was the settlor of only a single trust, in favour of his daughters, and was not a settlor or beneficiary of any other trust, UK or otherwise. HMRC was able to work with the Singaporean tax authorities and discover that Ecclestone was in fact a settlor and beneficiary of multiple trusts, in particular one which held a company that sent £416m to a bank account in Singapore in 2010.

The chief crown prosecutor, Andrew Penhale, stated: "Bernie Ecclestone has pleaded guilty to a single offence of fraud relating to dishonest representations to HMRC. All members of UK society, regardless of how wealthy or famous they are, must pay their taxes and be transparent and open with HMRC about their financial affairs".

Ecclestone had been under civil tax investigation since 2012 and was given multiple opportunities by HMRC to be honest about his tax affairs, and pay the tax that was due, but he failed to do so.

Ecclestone would have been required to correct the mistakes in his tax affairs through a formal process called the Contractual Disclosure Facility, commonly referred to as ‘COP9'.

COP9 investigations are the most serious type of civil investigation undertaken by HMRC. In the process of a COP9 investigation, an offer is made whereby the individual will receive immunity from criminal investigation and/or prosecution in return for:

Admitting they have acted deliberately in failing to declare income or gains; and
Agreeing that they will fully disclose all irregularities in their tax affairs for the relevant period (typically 20 years).

The individual has 60 days to accept or reject the COP9 offer. If the individual accepts this offer the individual is also accepting that they will pay a minimum penalty of 35% of the unpaid tax.

Not responding to this offer would be considered a rejection and a criminal investigation will generally begin. If an individual is deemed uncooperative, the level of penalties that HMRC can levy are far higher than if the individual was to cooperate throughout the process.

By Edwin Coe tax team Sean Bannister and tax assistant Henry Hinton