Suing scheme promoters: Horner

When things go wrong it’s human nature to see who you can blame. The principle applies to failed tax avoidance schemes as much as to any other of life’s little reversals. And the seemingly unending stream of HMRC successes in the courts must be giving some cause for concern not only to past participants in schemes but also – perhaps even more so – to their promoters. In this context, many will be poring over the recent Court of Appeal decision in Allison v Horner.

Mr Horner, a chartered accountant though not a practising one, was induced to invest in a “Unique Low Risk High Return Investment Proposition” (aka a film scheme) which was being promoted by Taipan Creative LLP. It didn’t work, Mr Horner was required to pay back his tax refund plus interest and penalties and he took legal action. Specifically, he sought damages from one Ms Allison for her allegedly fraudulent representations: it seems that in her enthusiasm, a few questionable assertions had somehow crept into her power-point presentation – such as that the scheme had been approved by HMRC, that investors were guaranteed a return on their investment and that the scheme had a proven track record of success. None of these were strictly speaking quite true – in fact the trial judge described the scheme as “a fairly uncomplicated fraud on the Revenue”. The key point of wider application is that, in our experience, representations of this kind have in the past been not at all uncommon in certain sectors of the tax avoidance industry.

Of particular note is the fact that the action was against the individual who had allegedly made the representations and not against the LLP with which Mr Horner had contracted: this may have some salesmen quickly checking back to exactly what they did say when selling their scheme.

The High Court had already found in favour of Mr Horner: the Court of Appeal was concerned only with whether the claim was out of time. The point here was that the legal action had to be started within six years of the time at which Mr Horner “could with reasonable diligence have discovered” the fact that fraudulent representations had been made. The facts and the timeline were carefully analysed by the Court of Appeal. HMRC enquiries started in January 2004. Mr Horner’s new advisers wrote to Taipan in April expressing profound disquiet. But it was only at a meeting in August that HMRC stated definitively that that the scheme was “fundamentally flawed”. So the legal action, started  by Mr Horner on 19 July 2010, was in time. And Ms Allison will need to find the thick end of a quarter of a million pounds to meet Mr Horner’s claim.

NICOLA HALL

BILSHAN MENSAH

Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.

ELANA DIMMER

Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.

ENQUIRY FORM

By submitting this form, the data provided will be used to perform your request according to our privacy policy.