Since March 2010 the trio, plus manager Jonathan Wild, have served as directors of Larkdale LLP, one of 50 entities that Icebreaker arranged helped exploit tax reliefs that were originally designed to provide support to the music industry.
The four men are believed to have paid approximately £66 million into the investment schemes, which allowed them to avoid tax on nearly £63 million of income generated from touring, music sales and other endorsements.
Tribunal judge Colin Bishopp ruled that Icebreaker “is, and was known and understood by all concerned to be, a tax avoidance scheme”.
“The aim was to secure [tax] relief for members, and to inflate the scale of the relief by unnecessary borrowing,” he added.
While Barlow, Donald, Owen and Wild could end up repaying millions of pounds between them for using this avoidance scheme, the exact amount is not known.
However, within the letter of the law, they have not actually committed a criminal offence.
Following Judge Bishopp’s decision, HMRC announced that those involved would receive letters detailing the amount they need to repay.
An HMRC stated that “anyone using a scheme that HMRC deems to be against the rules owes them money”.
Although tax avoidance is usually legal, it can easily turn into tax evasion.
And tax evasion – a purposeful method of cheating the taxman – is certainly a criminal offence.
This leads to the inventible question: what is the difference between tax evasion and tax avoidance?
Look out for KinsellaTax’s white paper on the differences between tax avoidance and evasion later this week, which discusses each issue in depth.