Last November, 14 former footballers launched a legal action against St James’s Place (SJP), alleging that they received poor advice concerning tax avoidance film and overseas property schemes. The players included Andy Townsend, formerly of Chelsea and now a commentator on Match of the Day, David Livermore (ex-Millwall); Colin Cooper (ex-Nottingham Forest) and Linvoy Primus (ex-Portsmouth). The footballers’ claim of around £15 million is being defended by SJP, which described it as being ‘without merit’.
Even bigger names have also been suing their advisers. Former Liverpool player, Steven Gerrard, who currently manages Rangers, was one of a number of investors who launched a £100m claim against the private banking division of HSBC in relation to a film scheme operated by Ingenious Media. Meanwhile ex-Manchester United player Andy Cole sued Coutts after reportedly losing £8m in a similar scheme marketed by the bank.
In August 2019, HMRC won a significant victory in a £450m tax avoidance scheme invested in by several footballers, including David Beckham. The scheme, run by Ingenious Media, involved the financing of more than 60 films. In the longest ever tax tribunal appeal, Ingenious lost its fight to overturn an earlier ruling in favour of HMRC. Two other ex-footballers and Match of the Day presenters, Gary Lineker and Robbie Savage, also invested in film schemes set up by Ingenious.
Hindsight is a wonderful thing and when the footballers in question entered into these schemes, they did so at a time when high net worth individuals, or anyone with significant surplus income would, in all probability, have considered the same strategy. They were that prevalent. Indeed, a number of partners in elite City law firms were among those that chose to do so.
The distribution and success of such schemes was reliant on armies of talented salesmen, including IFAs, accountants and banks, who may have failed to make their clients fully aware of the risks involved. Their strike rate is evident from the numbers: in total, more than £10bn was channelled through film tax-avoidance schemes.
The psychology of such tax schemes and those that enter into them is often overlooked. In the case of footballers, it may be correct to say that many will have “followed the leader”. In dressing room talk, if player X is doing something that they think will save them in tax, others will readily follow suit. Agents and advisers are very happy to massage the egos of their young, wealthy clients because they undoubtedly benefited from commission income from the investments that were made.
Whether it was ever foreseeable that HMRC and the courts would end up not only attacking these schemes (and winning), but also so successfully shutting down an entire industry that had got out of control, is a moot point.
At the end of the day, to coin a much-loved football expression, the investors made the investment and they are responsible for their own actions. The reality may well be that the footballers did not understand the mechanics, structures or tax implications of the investments they were making and were unable to assess the associated risks. But in law, it is long-established legal principle that ignorance is no defence.