LONDON, March 1 (Reuters) - A prominent London hedge fund manager has failed in his attempt to shelter 19 million pounds ($29 million) of profits from taxes through the use of an avoidance scheme, the UK tax authority said on Friday, as it steps up a government-backed crackdown on such schemes.
Patrick Degorce, chief investment officer at hedge fund Theleme Partners, availed himself of a scheme marketed by film finance group Goldcrest Pictures Limited, which involved buying and selling movie rights via a British Virgin Islands entity.
The transactions created losses which Degorce sought to offset against 18.8 million pounds of profits from his hedge fund, Her Majesty’s Revenue and Customs (HMRC) said.
But a Tax Tribunal has now ruled that Degorce could not reduce his taxable income in this way, HMRC said in a statement.
”Mr Degorce put in nearly 5 million pounds of his own money, including 1.6 million pounds which went into the promoter’s pocket, but all he has come away with is an HMRC enquiry and an appearance before a tax tribunal, said Jim Harra, HMRC director-general, Business Tax.
A spokeswoman for Degorce said he planned to appeal against the decision and that the statement issued by HMRC on the case was “riddled with errors” but declined to identify the errors.
“Mr Degorce believes his film business has been conducted in full accordance with UK tax rules,” she said.
Degorce is well-known in London’s hedge fund community, having been a founder and partner at activist firm The Children’s Investment Fund (TCI), where he led a public battle against the management of Dutch bank ABN Amro in 2007.
He left TCI in 2009 to set up Theleme.
Tax minister David Gauke said the case showed the government would ensure all members of society paid their fair share of taxes, echoing recent comments made by Prime Minister David Cameron about “aggressive” avoidance of tax.
“The Government has made it clear that we will not allow marketed avoidance schemes to deprive the UK of vital tax revenues,” Gauke said.
“We have invested nearly 1 billion pounds to help HMRC take action against the minority of taxpayers who think they are above the law, we are bringing in new anti-avoidance legislation and we are giving HMRC greater powers to clamp down on those who sell dubious avoidance schemes like this one.” ($1=0.6588 British pounds) (Additional reporting by Laurence Fletcher; Editing by Greg Mahlich)