A leading tax silk has been accused of giving ‘negligent advice in the most authoritative terms’ about film financing schemes which were later shut down by HMRC causing ‘dire financial consequences’ for investors.
More than 100 investors are suing Andrew Thornhill QC over his advice that ‘three materially identical’ businesses would provide tax benefits. The schemes were advertised in the early 2000s as an opportunity to engage in activities in the film industry that would entitle them to tax relief against other income, the High Court heard this week.
Thornhill, called to the bar in 1969, ‘gave unequivocal and unqualified advice in writing that statements provided to prospective investors about the availability of tax relief were correct’ and said there was ‘no doubt’ that the proposed businesses would be trading, Anneliese Day QC, for the claimants, said in written submissions.
However, HMRC issued a closure notice in 2016 after it concluded that ‘the tax benefits which the claimants were told they would obtain were not available to them’, the court heard.
Ten claimants, who between them invested more than £3m in the schemes, are having their cases tried as sample claims at a four-week trial in London as the investors try and recover their losses from Thornhill.
Opening the claimants’ case, Day said Thornhill ‘knew he was the lynchpin of this scheme’ and accused him of using ‘smoke and mirrors [to] seek to evade responsibility for what he voluntarily did and was paid to do’. She told the court: ‘His conclusion and his advice was that these schemes would unequivocally work from a tax point of view... not that they might work but that there was no doubt that they would work.’
The schemes were ‘sold’ to investors ‘on the basis of his unequivocal endorsement’, Day said, which ‘added legitimacy and attractiveness to these schemes’. His advice was presented as ‘effectively as good as an advance ruling from HMRC’, she added.
Tom Adam QC, for Thornhill, argued in written submissions that the nature of the duty the claimants allege his client owed was ‘bizarre’ and that their case ‘reeks of hindsight’.
‘Potential investors were from the richest and most commercially sophisticated elements of society,’ he said. ‘They were choosing to engage in high octane tax avoidance.
‘It was not reasonable – in fact, it was entirely unreasonable – for them not to take their own advice on the risks involved, and instead to rely on someone whom they knew to be advising the seller of the product which they were buying.’
The trial before Mr Justice Zacaroli is expected to conclude next month.
