Ecclestone sues HMRC for breach of contract

The Formula 1 chief executive, Bernie Ecclestone, is suing HMRC for breach of contract after the tax authority reopened a long-running case in relation to over £1bn in unpaid taxes.

The taxes are in relation to a family trust set up in 1997 by Ecclestone's former wife, Slavica.

Following a ten year investigation by HMRC, the parties agreed a financial settlement in 2008 (thought to be in the region of £10m) at which point a certificate of full disclosure was signed, which brought the matter to an end.

HMRC have now scrapped the agreement and reopened the case, because it believes it was 'misled and relied on representations that were false'.

Bernie Ecclestone commented: 'They made an assessment of me and we are effectively suing them for breach of contract'.

If HMRC are able to persuade the courts that they were misled, however, they will be able to walk away from the agreement and take criminal action.

Liechtenstein trust

In 1997, Ecclestone transferred the share capital of F1's parent company to his former wife, Slavica, which was ultimately placed in the Bambino Trust, based in Liechtenstein.

The beneficiaries of the trust were Slavica and the couple's two daughters, Tamara and Petra.

HMRC's ten year investigation was in relation to whether or not the transfer of the shares to Slavica, who is not a UK resident and therefore not subject to UK tax, had contravened anti-avoidance rules.

HMRC concluded in 2008 that the rules had not been breached, leading to the agreement between the parties through the certificate of full disclosure.

The tax authority has now revisited the case and issued a tax bill totalling £674m over a 13 year period, plus interest of £349m. There is also a possibility of penalty charges on top of these sums.

Andrew Watters, a tax expert and director of law firm Thomas Eggar, commented: 'The case indicates HMRC's focus on individuals with a UK link and who have offshore trusts. At the end of this year, various facilities which seek to encourage voluntary disclosure with advantageous terms come to an end.

'From 2016 it will be open season for HMRC who will be receiving huge amounts of information from governments around the world and using new IT systems to gather and analyse such information. There are going to be lots of enquiries generated.'

He added: 'In any enquiry, if you successfully argue with HMRC as to the relevance of a fact, they cannot withdraw from any subsequent agreement. If you omit or misrepresent a relevant fact, they can'.

Binyamin Ali is assistant editor of Private Client Adviser