Today The Times revealed the identity of investors in the “Liberty” scheme, described by the paper as an “aggressive” tax avoidance scheme. Such schemes have come under scrutiny by HMRC. Tax-saving schemes typically encouraged investment in software companies, the arts or film finance and legitimate tax breaks were offered to such investment under government-backed initiatives. However those schemes that have come under scrutiny involved what HMRC has described as an “artificial” means by which to increase losses against which tax relief could be claimed, including share or trade loss relief schemes. In other cases, on top of a capital investment, scheme members may have entered into non-recourse loans up to three times the value of the original investment and are now faced with huge tax bills as they have to pay back tax relief on the value of the loans. For many investors the losses will be several times that of their original investment.
Tucked away in the reporting about the Liberty scheme is the observation that investors may have relied on the advice of accountants or thought they were investing in a different sort of scheme. In other words, investors could have been mis-sold the investment. Whether or not the investors have a claim against their financial advisors to recoup losses will depend on how the scheme was sold to them and what they understood at the time, but it is highly likely in many cases that they will have been told that the schemes were legitimate and low risk, and they will not have understood the complexity of the scheme. Carter-Ruck has successfully represented investors in a film-finance scheme, who received substantial damages arising from mis-selling.