Northern Ireland

High Court hears HMRC accused of 'improper motives'

Belfast High Court
Image caption Belfast High Court

An investigation into suspected tax evasion by four Belfast accountants centres on how losses made by an investment partnership were offset against tax, the High Court has heard.

The details emerged during judicial review proceedings taken by Eamonn Donaghy, Jon D'Arcy, Paul Hollway and Arthur O'Brien.

The former KPMG partners are challenging the legality of searches at their homes and offices.

They were arrested in November 2015.

However they have not been charged with any wrongdoing.

Grounds for suspicion?

The court heard that HM Revenue and Customs (HMRC) investigators had suspicions about the men's use of a financing partnership which made loans to another firm under their control.

Focus Finance Partnership (FFP) was established in May 2009 with the stated purpose of providing short term funding for businesses.

It soon made unsecured loans of £800,000 and €2.2m to Jeap Ltd, a firm which the four men had set up in 2005.

Jeap was set up in 2005 and invested in property companies on both sides of the Irish border.

Within 24 months the value of FFP's loans to Jeap had been written down to zero with the loss available to set against other taxes.

A barrister for HMRC said that gave grounds for suspicion that FFP was not a business for making commercial loans but was a vehicle for claiming tax relief.

He added that while FFP had been established in 2009 the partnership document was not drawn up until March 2010 and it did not have a bank account until August 2011.

Aside from Jeap, it made one other loan of £300,000 to a County Armagh business woman.

'Nuclear option'

A barrister for the men said that HMRC had failed to ask the men simple questions about FFP and instead took the "nuclear option" of applying for warrants to search their homes.

He told a panel of three judges that the tax authority was legally obliged to have considered less intrusive steps in an attempt to quell any suspicions.

He also that claimed judges who granted the search warrants were given misleading information about the extent of the four accountants' co-operation with inquiries.

Adverse inferences were wrongly drawn from their alleged failure to get back to HMRC during correspondence in 2014, the court heard.

The barrister also said HMRC had been acting on improper motives.

"On the night before the warrants were executed senior (HMRC) managers were gleefully exchanging emails to the effect that this had the makings of a great story for them," he said.

The case continues.