- Image Courtesy of BBC

Did Hamilton evade tax?

1y ago

9K

Documents from the recent Paradise Papers show that Lewis Hamilton was granted a £3.3m VAT refund from the Isle of Man when he imported his private jet into Britain.

The structure that Hamilton's financial advisors set up was a complex one and, if you are further interested, you should look up greater details throughout the rest of the media. This is how tax avoidance schemes often work: tax structures are set up that are very complicated that even tax collectors have a hard time trying to understand it.

However, I will try my best to explain it as best as I can in a simple manner. Hamilton first bought the jet in the British Virgin Islands through a company that he owned called Stealth Aviation Limited for $26.8m (£16.5m). Hamilton then needed import the jet into the EU. In order to take advantage of this tax refund, he chose to import the jet into the Isle of Man. (The Isle of Man is not technically part of the EU: it is a British Crown Dependency, which forms a common area with the UK for VAT purposes and, therefore, is granted full access to the EU).

Hamilton's financial advisors then created a company in the Isle of Man called Stealth (IOM) Limited. This company then leased the Bombardier jet from the British Virgin Island company called Stealth Aviation Limited. The Isle of Man company, Stealth (IOM) Limited, then leased the jet onto a third party UK based jet management company. This third party company then leased the jet, along with a crew and other services, back soley to a third company owned by Hamilton called BRV Limited, which is based in Guernsey.

As a result of this, the Isle of Man company, Stealth (IOM) Limited, became a commercial aircraft leasing business. This allowed Hamilton's advisors to claim back the £3.3m VAT that was paid at the initial importation of the jet.

VAT refunds on aircrafts are perfectly acceptable for commercial uses. In the UK and EU, refunds are not allowed to be given for personal use.

The big, million dollar question, or rather £3.3m question, is which category does Hamilton fall under?

The documents suggest that Hamilton had estimated to use the jet personally for 80 hours a month and for business purposes for 160 hours a month. This would suggest that, at most, the Isle of Man should only have issued a two thirds tax refund of £2.2m.

However, is it possible to separate Hamilton's personal and commercial interests. F1 is such an integral part of all of the driver's lives. F1 is their lives and their lives are F1. For example, that trip that Hamilton took to Greece for a few days before Silverstone, despite the calls that it was just a holiday that allowed him to miss the London F1 Live event, was a key part of Hamilton being able to mentally recover from Austria and to mentally prepare himself for Silverstone. It wasn't just a holiday: it was also part of his Silverstone victory.

And also lets not forget that Hamilton is also a big celebrity and with celebrities, their personal and private lives are inseparable. Any public appearance that celebrities make are part of their brand image. All those fashion shows and clubs that Hamilton visits are imperative to building his brand image and allow him to create more endorsement deals.

So, is he using the jet for personal or commercial uses? The ethics of this arrangement are definitely up for debate, but is there anything wrong with it in the eyes of the law? Furthermore, should he be blamed for this, or should this be placed upon the Isle of Man for allowing this to be possible? There are approximately 50 other arrangements similar to Hamilton's that have been used in the Isle of Man to try and import aircrafts.

I am aware that I am not the last word when it comes to tax evasion and the law, and I definitely accept other people's opinions, however, this is my personal opinion as an ordinary middle class tax payer. The arrangement was possible and, therefore, I don't see any reason why he shouldn't have done it. It is not his responsibility to deal with a problem created by the law makers. If I had the option to save some money, I would have done the same thing. Furthermore, while I know that £3.3m is a lot of money and much more than I would earn in a long time, looking at the big picture, it isn't a large amount of money.

The Institute of Fiscal Studies predicts that in the 2016-2017 financial year, the UK tax payer will pay a total of £716.5 billion. This dwarfs a meager £3.3 million. Lets not forget that Hamilton also appears to pay the rest of his tax, which, again, dwarfs that figure. When I first saw this storey, I thought that this was going to be a lot worse than it turned out to be. Also Hamilton's net worth is so much bigger than this figure anyway, to him it was probably just a big middle finger towards the Isle of Man, Theresa May's 'strong and stable' government and the rest of the EU.

Furthermore, this has avoided a lot less money than a lot of the scandals that have appeared in the Paradise Papers; the only reason that it gained a lot of attention is that Hamilton is F1 World Champion, he just got a fourth title last week and that he is a big celebrity. There were 50 other arrangements that were similar that haven't been reported on.

I do not believe that Hamilton did anything that contradicted the law in anyway whatsoever, he did something that many people have done and is perfectly acceptable. I can also see some of the motives for doing this. More of the blame should be placed upon the Isle of Man and the UK for allowing this to be possible. I do not wish to make this too politicised, but those loopholes are only in place because that is what the rich, elite law makers want so that they can protect their own wealth.

Just like with the big businesses such as Apple, Google, Facebook and Amazon: everyone else is doing it, so have to do it to stay competitive. While people are not businesses, similar principles can be applied.

I think that this is really not the biggest issue that is facing ourselves at this moment in time. There are bigger issues in the Paradise Papers and there are also much bigger issues debasing our political landscape. A Russian loving, orange-faced, tweeting buffoon is in the White House, North Korea want to go to war, we're destroying the pound by leaving the EU, the Queen's and Prince Charle's offshore investments, there's mass poverty, fake news, the massive threat of global warming and lets not forget the fight to save the manuals and the iPhone home button. Against all of these, a measly £3.3m that hasn't been paid can wait.

If you want to find out more about this issue or anything else stemming from the Paradise papers, some very good resources have been created by the BBC

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Written by Davs Grove - Tribe Leader of the Car T-Shirts Tribe

With thanks to the BBC and Institute of Fiscal Studies

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Comments (6)
  • 3.3 million is not a lot of money? It is to me. If you add all those £3.3m together by all that take advantage, that a big loss to the exchecquer. These big earners could afford to pay their tax liabilities whilst we are still in austerity. LM fan saying this btw

    1 year ago
  • Just a note but evasion is illegal, avoidance is legal. Quite important to know the difference here.

    1 year ago

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