HMRC seeks more audit files from EY in property tycoon’s tax dispute
Counsel for HMRC asked the court this morning to see more of EY’s audit files in relation to the property tycoon’s tax affairs dispute.
HMRC filed a claim to the High Court against the Big Four firm over allegations it misrepresented its client tax affairs to the HMRC.
The client was the British property investor Jamie Ritblat, the son of former British Land owner Sir John Ritblat, who founded Delancey in 1995. He later bought London’s Olympic Village in 2011 via a joint-venture with Qatar’s sovereign wealth fund.
The claim stated that EY failed to disclose “key facts” that could have helped it recover more tax revenue from Delancey’s profits allegedly paid into an employee benefit trust.
This lawsuit came following Jamie Ritblat’s lawsuit against HMRC over a 2015 tax settlement amounting to £400. HMRC filed a counterclaim against him and his businesses.
The revenue agency said it is seeking to overturn the settlement that is blocking it from collecting taxes on £141m profits.
DV4 Trust is at the heart of this dispute, which Ritblat is a beneficiary of after it was established in 2007 to act as an employee benefit trust. HMRC alleged that DV4 Trust paid £141m to Delancey employees, including £63m to Ritblat across 2015/16 to 2018/19 tax years.
At a case management conference this morning, HMRC barrister Gareth Tilley told the court that HMRC wants to argue that EY had a “duty of care” and in order to “clear the hurdle”, they need to show that EY had documents that could have been cross-checked.
EY partner Jim Wilson was at the heart of the submission over what he and his team had accessed and what they could have accessed. It was pointed our that Wilson will be a witness at the trial, as expert evidence for this case are due to be exchanged by 15 March.
Counsel for EY noted the question of what Wilson and his team had access to is a question that will be answered by witness evidence and not contents of files.
EY’s legal team also highlighted it was concerned the audit files are files of information that belong to DV4 Limited, which is not a party involved in this claim. They noted that they are “owed a duty of confidence with respect to the contents of those files.”
Master Pester did not rule on this matter today as he is waiting for HMRC legal team to respond to a letter EY’s legal team sent on 6 December.
A further case management conference was scheduled today to be heard on Friday 8 March for all parties. The judge did note that due to the complexity of the case, it’s a “case that needs an active case management.”
EY had no further comments to make from its previous statement which stated: “while it would be inappropriate to comment on ongoing legal proceedings, we strongly refute any suggestion of wrongdoing by EY and will vigorously defend the claim against us.”
A HMRC spokesperson said: “Misrepresentations were made to us in 2015. Clearly, had appropriate disclosures been made, the settlement agreement would not have been entered into. It is our duty to ensure everyone pays the right tax under the law, regardless of wealth or status.”
Delancey also had no further comment from its previous statement. That statement was: “Unfortunately proceedings have had to be brought against HMRC as they have breached the terms of an agreement in respect of an employee benefit trust settlement opportunity which they conceived, promoted and offered to large numbers of employers and employee benefit trusts. The DV4 trust took up HMRC’s offer and reached an agreement with them on exactly the same basis as hundreds of other trusts. HMRC is now seeking to rescind the agreement on the grounds that it was not given certain information but in practice the information in question is irrelevant to the tax due under the legislation, HMRC didn’t normally require it, and in this case it specifically confirmed at the time that it did not require it. We therefore believe the agreement is valid and that the reasons put forward by HMRC to justify their breach are erroneous and misconceived”.
This story has been updated to include comments from all parties. It was also updated to explain DV4 Trust.