Three payment programmes operated by a company linked to the husband of the Conservative peer Michelle Mone have been named as tax avoidance schemes by HM Revenue and Customs.
Douglas Barrowman, Lady Mone’s husband since they married on the Isle of Man in November 2020, is the founder and chairman of the Knox Group, a financial services and wealth management firm based on the island, which is widely considered to be a tax haven. HMRC said a Manchester-based company, AML Tax (UK) Ltd, which ran the three newly named tax avoidance schemes was “a part of Doug Barrowman’s Isle of Man-based Knox Group”.
HMRC won legal cases against AML last year under tax laws that require companies to notify HMRC of payment schemes that should be classified as tax avoidance schemes because one of the “main benefits” is to obtain a “tax advantage”.
AML’s director, Arthur Lancaster, told the tax tribunal last year that AML was part of the Knox Group, together with other companies such as Knox House Trust, of which Lancaster was the chairman in 2019.
In March, HMRC also won a separate legal case against AML, which was fined £150,000 after being found not to have provided details to the tax authority required by law. In that case, Lancaster was said by the tribunal to have been “evasive” and displayed “a lack of candour” in some of the evidence he gave.
HMRC also linked AML to Barrowman’s Knox Group at that time, stating in a press release announcing the result of the case: “Doug Barrowman tax avoidance firm fined,” and saying: “A company which has aggressively promoted tax avoidance schemes in the UK for years has been fined £150,000 for failing to provide HMRC with legally required information.
“AML Tax (UK) Limited, directed by Arthur Lancaster and part of Doug Barrowman’s Isle of Man based Knox Group, was fined £150,000 after HMRC brought an upper tribunal case over the firm’s failure to comply with formal information notices as part of a tax investigation.”
Also, in relation to some of the evidence Lancaster gave in a different legal case, he was described as “disingenuous” and “increasingly evasive” by the tax tribunal judge Tracey Bowler, who classed two of the AML schemes as tax avoidance.
A source at HMRC said its growing policy of publicly naming such schemes is part of a strategy aimed at deterring people from signing up for them, and ultimately driving the schemes out of business. The UK tax authority’s enforcement actions have attracted intense controversy in recent years because people working in relatively modestly paid jobs, who were paid through such schemes, have been hit with large bills after HMRC succeeded in establishing that insufficient tax had been paid.
In its campaign, “Tax avoidance – don’t get caught out”, HMRC features a nurse and an IT project manager who signed up for schemes, not stated to be those of AML, that offered to maximise their take-home pay, but who were later subjected to large bills for tax that was avoided.
In relation to the three AML schemes named this week, Mary Aiston, HMRC’s director of counter-avoidance, said: “These schemes are cynically marketed as clever ways to pay less tax. The truth is they rarely work in the way the promoters claim and it is the users that end up with big tax bills. HMRC will continue to use all the powers at our disposal to crack down on promoters.
“Anyone who thinks they may be involved in a tax avoidance scheme, or have been approached by a scheme promoter, should contact us as soon as possible to get help.”
Mone, who was appointed to the House of Lords by David Cameron in 2015, announced a leave of absence from parliament in December to “clear her name”, according to a spokesperson, after the Guardian reported details relating to a different company linked to her and Barrowman, PPE Medpro. The Guardian reported that bank documents indicated that Mone and her three adult children had received £29m originating from the profits of the company on government PPE contracts. The £29m had been distributed by Barrowman from at least £65m he was paid from PPE Medpro’s profits, according to the documents.
A lawyer for Mone said at the time: “There are a number of reasons why our client cannot comment on these issues and she is under no duty to do so.”
(December 6, 2020)
The Guardian reports that PPE Medpro, a company awarded two government contracts worth over £200m, has links to Douglas Barrowman, Michelle Mone’s husband. Lawyers for Mone and Barrowman denied that they had any “role or function in the company, or in the process by which the contracts were awarded”.
(April 6, 2021)
Reporting on emails released in a legal challenge brought by the Good Law Project, the Guardian reports on the existence of the VIP route or high priority lane, and reveals that ministers were among the “main routes” through which well-connected companies were given priority in the sourcing of PPE equipment.
(November 6, 2021)
Mone is revealed as the “VIP” who referred PPE Medpro Ltd to Lord Agnew. Lawyers representing Mone described the referral as a “very simple, solitary and brief step”.
(January 6, 2022)
Leaked documents suggest Mone and Barrowman are involved in PPE Medpro.
(March 6, 2022)
Documents reveal that Mone secretly approached Michael Gove, who was then a Cabinet Office minister, and Lord Agnew though their private emails.
(March 6, 2022)
More leaked documents reveal surgical gowns bought by the government for £122m were purchased by PPE Medpro’s supply chain partners for £46m from a Chinese manufacturer.
(November 6, 2022)
Guardian reveals £29m originating from PPE Medpro profits was paid to a secret offshore trust of which Mone and her children were beneficiaries, according to a report compiled by HSBC and leaked to the newspaper.
(December 6, 2022)
Mone takes a leave of absence from the House of Lords with immediate effect “in order to clear her name of the allegations that have been unjustly levelled against her”, according to her spokesperson.
(December 19, 2022)
The UK government confirms it has started legal action to recover the £122m it paid to PPE Medpro to supply 25m sterile surgical gowns, as well as the costs of storing and disposing of the gowns, which were rejected after inspection.
(January 5, 2023)
The Department of Health and Social Care claims the PPE Medpro gowns were not sterile and could have compromised the safety of patients in the NHS.
A lawyer who represents Barrowman and PPE Medpro said that a continuing investigation limited what his clients were able to say. He added: “For the time being we are also instructed to say that there is much inaccuracy in the portrayal of the alleged ‘facts’ and a number of them are completely wrong.”
Responding to questions about AML’s tax avoidance schemes, Mone’s lawyer said: “Baroness Mone has no involvement in the companies you have referred to.”
Barrowman’s lawyer said he was in meetings and could not be reached for a response in the time given.
Lancaster said he was working on a full response to HMRC’s naming of the schemes, but said: “I should point out that AML Tax (UK) Ltd ceased its business over six years ago, following the introduction of the much-criticised 2019 loan charge. This was designed by HMRC to retrospectively tax arrangements which had, until then, been in accordance with the legislation as confirmed by several tax cases.”
HMRC has defended the “loan charge” as a means of ensuring full tax is paid where it was avoided by means of loans, and denies that it is retrospective. A spokesperson said of the concerns of people hit with large bills: “We take concerns about the wellbeing of all taxpayers seriously and recognise that large tax liabilities can add significant pressures for some taxpayers.”
