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June 2025 Tax Investigation Round Up

June's round up of the latest tax investigation news and cases:

  • £1.6m tax appeal lost by boatyard owners
  • Former footballer bankrupted by £36k tax bill
  • The businesses owing £138m in tax and penalties

£1.6m tax appeal lost by boatyard owners

The owners of Chelsea Yacht & Boat Company based at Cheyne Pier have lost an appeal over entrepreneurs' relief for more than £880,000 each, but had £360,000 in penalties overturned by the First Tier Tribunal.

Andrew Moffatt and Charlotte Moffatt appealed against HMRC's refusal to grant entrepreneurs' relief claims of £887,770.70 and £888,123.80 respectively on the disposal of their shareholding in Chelsea Yacht & Boat Company Limited. The company, which claims to be "home to the oldest working boatyard in central London," was incorporated in 1947 and operates from Cheyne Pier, Chelsea, providing moorings, services, maintenance, repairs, and renovations to boats.

Complex corporate structure and acquisition

On 12 July 2015, both appellants incorporated Chelsea Marine Limited, followed by Chelsea Marine (Jersey) one month later in the Channel Islands. The Jersey-based company subsequently acquired the share capital of Chelsea Yacht & Boat Company for £4.3m in July 2016.

However, a report issued to the board of Thames River Moorings claimed the real value of the boatyard was £17.8m, prompting HMRC to request more information on the company's valuation.

Valuation discrepancy explanations

Andrew Moffatt explained why the purchase price was significantly lower than the apparent true value, stating that the sellers viewed the business as "akin to a carpark" and had no desire to continue operating it.

Moffatt outlined significant potential for value enhancement, including the "potential to increase the mooring fees by 60%" and increasing the length of boats that could be moored, which would boost fees by a further 58%, thereby substantially increasing the business valuation.

An independent valuation conducted by Peter Riches of Morley, Riches and Ablewhite found that mooring fees would be worth between £45.6m and £53.2m over a 10-year period.

Riches concluded: "In summary, we strongly believe that the valuation applied to the sale of Chelsea Yacht and Boat Company Limited to Thames River Moorings Limited was in no way undervalued. In our opinion it was a conservative valuation."

HMRC investigation and penalty assessment

After the appellants filed their tax returns for 2017 and 2018, HMRC launched an enquiry into their returns for the year ending 5 April 2017, issuing closure notices to both appellants on 11 March 2021.

HMRC imposed penalties of £186,158.04 and £186,133.26 respectively, claiming the pair did not take "reasonable care" with their tax returns in the 2016-17 tax year, which contained the entrepreneurs' relief claims.

Financial performance and location claims

The company's 2017 accounts showed a turnover of £2,064,578, significantly lower than projected figures, with mooring fees accounting for £1,015,612 of the total revenue.

Andrew Moffatt claimed that Chelsea Yacht & Boat Company should be valued at least 16% higher than other local mooring companies because "Albert Bridge was very Instagramable." However, Judge Grant Williams "did not accept his evidence."

Legal arguments and tribunal decision

Micheal Thomas KC, representing the appellants and appointed by Blick Rothenberg, argued: "There was no inaccuracy because they were entitled to claim ER. Reasonable care was taken to avoid inaccuracy as appropriate professional advice was obtained and, in the alternative, the maximum percentage reduction should be given for disclosure."

Thomas also contended that income from mooring fees and licences "is in reality comprised of three elements," arguing that "the right to use a boat at a specific location corresponds to trot moorings (as bare mooring rights) and the way to determine the amount of income within s207(4) CTA 2009 is to use the trot mooring fees at Chelsea Reach as a comparator."

Alex Turnbull, litigating for HMRC, countered that "activities carried out under the heading of 'mooring fees and licences' are non-trading activities and in the nature of exploiting a right over land," and that the "exceptional" prices resulted from the location rather than the services provided by Chelsea Yacht & Boat Company.

Turnbull further argued that "the appellants did not take reasonable care in filing their returns as they did not receive any written advice from Blick Rothenberg [BR] to confirm that they were eligible to make a claim for ER," adding that "if the appellants had sought advice or clarification from BR, it would have been apparent that the agent did not have all the relevant information."

Tribunal findings

Judge Williams firmly rejected the appellants' arguments regarding the nature of their income, stating: "We have no hesitation in dismissing Mr Thomas' submission. There was no evidence before the tribunal that the row marked 'mooring fees and licences' in the 2017 accounts is comprised of three elements and we agree with Turnbull's submission that the income from mooring fees and licences is simply that: income from mooring fees and licences."

However, the tribunal took a different view on the penalties. When Turnbull claimed that Andrew Moffatt should have contacted HMRC "to ascertain the correct tax treatment of his disposal of CML," arguing that a "reasonable taxpayer would have contacted HMRC," Judge Williams responded: "We have no hesitation in rejecting this submission. There is no obligation on taxpayers to contact HMRC to ascertain the correct tax treatment of a transaction or any potential claim for relief."

Final outcome

The appeal for entrepreneurs' relief was dismissed, but the penalties were overturned as the tribunal found the appellants had taken "reasonable care to avoid inaccuracy" in their tax returns.

Note: Entrepreneurs' relief was changed in March 2020, reducing the lifetime limit from £10m to £1m, and is now known as business asset disposal relief (BADR).

Former footballer bankrupted by £36k tax bill

After failing to appear before the court to pay the tax bill or declare he did not have the means to pay, a former footballer and pundit has been issued a bankruptcy order

Former England, West Ham and Manchester City footballer Trevor Sinclair, 51, has been declared bankrupt after failing to pay a £36,424 tax debt to HMRC. The sports pundit was made bankrupt on Thursday 12 June following a High Court hearing in central London, which he did not attend.

Court proceedings and failed negotiations

Sinclair had previously been granted additional time by HMRC to settle the outstanding debt in April of this year. At that earlier hearing, Judge Wilkinson warned: "Mr Sinclair has to wake up to the fact that there's no more head in the sand because this is serious."

However, when the case returned to court in June, Sinclair failed to appear or provide any proposals for payment. Judge Wilkinson explained the situation: "The last hearing was adjourned in order for proposals to be put forward by Mr Sinclair, but we have received no contact from him since then and nor have any proposals been put forward."

Following Sinclair's absence and lack of communication, Judge Wilkinson made a bankruptcy order against the former footballer.

Origin of the tax debt

The debt accumulated during the 2021-22 tax year through Sinclair's broadcasting work as a pundit for various media outlets, including the BBC and TalkSport. The total amount of £36,424 comprised two separate payments of more than £13,000 each owed to HMRC for his broadcasting activities, along with National Insurance contributions and penalty payments.

Business connections

Sinclair has been a member of Inside Track 2 LLP since 2004, alongside numerous other former footballers and broadcasters. Inside Track 2 LLP is connected to Ingenious Film Partners 2 LLP, which appeared before the Court of Appeal in 2022.

The businesses owing £138m in tax and penalties

A wholesaler of machine tools is this month's worst deliberate tax defaulter, owing HMRC over £33m, while a trio of payroll agencies have dodged £6.1m in combined tax obligations.

A record 158 companies feature on the latest deliberate defaulters list, owing HMRC £102m in tax and £36m in penalties, totalling £138m - up from £101m last quarter. The list includes a plastic surgeon, anaesthetist and dentist, plus one accountant, numerous builders, several couriers and a demolition company.

Largest individual defaulter

Top of the list is Hillsea Electric Limited, a wholesaler of machine tools owned by sole director Jozeph Donkersloot, 61, and now in liquidation following an HMRC winding up petition in March 2023.

Hillsea Electric, based in Hythe, Kent, was incorporated in March 2023 by the Dutch national but within nine months managed to accumulate an unpaid tax bill of £19.7m and penalty of £13.3m, totalling £33m. This occurred despite filing accounts in June 2024 for a dormant company with no assets, and the business maintains no web presence.

Major demolition company debt

Another significant defaulter is Squibb Group Ltd, Barking-based demolition specialists, which has a four-year tax default spanning February 2011 to January 2015, amounting to £8.1m in tax and £6.2m in penalties—a total of £14.3m due to HMRC. The business collapsed in December 2023 after receiving a winding up petition, with liquidators appointed in April 2024. The company had been appealing the tax assessment when it went into liquidation.

Payroll agency problems

With umbrella companies frequently being named and shamed for bad practice, this quarter sees two payroll agencies in the top 10 worst offenders, owing HMRC a combined £5.2m related to their umbrella company operations.

Engage Paid Limited

The first is Engage Paid Limited, briefly known as PB Payroll Ltd and Tervose Partners Ltd, based in Ilkeston, Derbyshire, with a registered office in Wolverhampton.

Engage Paid has had two directors over the past three years. Original founder Timothy Gordon Gale, 58, served as sole director from January 2022 to May 2024, running the business during the period when the tax debt arose before resigning and being replaced.

The company owes £2.16m in tax and £1.5m in penalties, accumulated over nine months from July 2022 to April 2023. Originally established in January 2022 under the Tervose Partners name, it remains active on Companies House under the Engage Paid name. The latest filed total exemption accounts for the year ending 31 January 2024, submitted in November 2024, reported profits of £90,543. The business has no web presence.

Only Best Limited

The second payroll agency is Only Best Limited of Birmingham, facing an unpaid bill of £1.55m, comprising £974,819 in tax and a penalty of £580,017.30. This debt accumulated over just three months from 1 February to 30 April 2024.

Only Best was established in August 2021 before being taken over by Shamim Noor Islam, who was appointed sole director in June 2023 and assumed sole ownership. The company's accounts are overdue and it is currently being struck off the Companies House register. The agency promotes its payroll service on LinkedIn with the slogan "Why settle for the rest, when you can have Only Best."

Repeat offender

Featured on the list for the second consecutive quarter is another payroll provider, Hive 360 Limited, with an additional HMRC demand exceeding £900,000, comprising £545,291 in tax and a £354,439 penalty for the period February 2019 to 31 July 2022.

Other notable defaulters

Vape retailer

Cloud Professor Ltd, a vape retailer from Chelmsford, owes £752,303, split between £456,633 in tax and a penalty of £295,669. Established in 2017, the company now faces an active proposal to strike off and failed to file accounts for FY24. The business has two directors, Andrew Brocklebank and Kayleigh Brailey, with tax debts relating to a three-year period from January 2020 to September 2023.

Medical professionals

The list includes several healthcare professionals:

  • Dr Matthew Barnard, a London-based consultant anaesthetist, owes £712,480 related to a disputed bill covering seven tax years from April 2015 to April 2022, including £419,106 in tax and a £293,374 penalty
  • Dr Katarzyna Bagniewska-Tomczak, a dentist from Nottingham, owes £57,000 for obligations dating from 2014 to 2016
  • Dr Mabroor Bhatty, a cosmetic surgeon from Birmingham, faces an unpaid tax and penalty bill of £59,000 for tax year 2014-15

Accountancy firm

Earl and Grey Accountants Ltd, based in London Docklands, represents the sole accountancy firm on the list, owing a historic tax bill of £154,765 plus a penalty of £103,934, totalling £257,000, related to several periods from March 2016 through February 2023. Established in 2012, the firm continues trading with a sole director and maintains up-to-date account filings at Companies House.

Additional substantial debts

Other significant defaulters include:

  • Stellar Services, a security guard business from Windsor, owing £6.8m for tax and penalties related to July 2022 to April 2023, now in liquidation
  • Hizer Ltd, a general wholesaler from Corby, Northamptonshire, owing £8.4m, with the company having collapsed

Sector diversity

The latest update includes cases from across the UK spanning various sectors including property, construction, hospitality and healthcare. In each case, the taxpayer failed to fully disclose their default to HMRC at the investigation's outset.

Official response

HMRC emphasised: "It is important to note that this list only includes those penalised under civil procedures and does not include criminal convictions for tax fraud."

Kevin Hubbard, HMRC's director of individuals and small business compliance, commented: "The overwhelming majority pay the tax they owe, but for those who refuse, we use a range of tools to take firm action.

"This includes publishing the names of those penalised for deliberate defaults to influence taxpayer behaviour and encourage defaulters to engage with HMRC."

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