By Ashley Young-
Three ethical directors from Dorset have been disqualified after withdrawing millions in a tax scheme they knew was being investigated by the HMRC. Matthew John Pickard (48) is from Poole, while Stephen Phillip Greenaway (40) is from Bournemouth and Paul Adam Laver (40) is from Ferndown have all been disqualified following the scandal, which was the subject of an investigation by the Serious Fraud Office in 2016 .
Ethical Forestry Limited was incorporated in December 2007 and owned 80% of a Costa Rican company, who in-turn owned plantation land, a sawmill and the infrastructure to plant trees in forestry plantations. The Director of the Serious Fraud Organisation( SFO )opened an investigation into the tree based investment schemes run by the Ethical Group that included Ethical Forestry Limited in December 2016.
The Proceeds of Crime and International Assistance Department also opened a confiscation investigation into all suspects. An estimated 3,500 UK investors were registered with the company and invested approximately £70m in the unregulated scheme to own trees on the plantations. Many people invested in Ethical Forestry by transferring their occupational pensions into Self-Invested Personal Pensions (SIPPs), using providers such as Liberty SIPP.
However, unknown to the investors, the directors caused Ethical Forestry in 2012 to enter into a tax planning scheme. This saw £28.8m being made available to the directors through loan accounts and the company’s financial statements for 2012 to 2014 show that in excess of £19m was withdrawn by the directors.
TAX SCHEME
In March 2013, HMRC informed Ethical Forestry that they were going to investigate the company’s new tax planning scheme . Despite the warning from the tax authorities, £7.2 million of the £19 million drawn down by the directors from their loan accounts was withdrawn after this date. Ethical Forestry were issued further notices by HMRC claiming more than £14 million of liabilities for tax years 2011/12 and 2012/13.
Later that year in December 2015, Ethical Forestry entered into Creditors Voluntary Liquidation as it could not pay its debts. This triggered an investigation by the Insolvency Service into the conduct of the directors, discovering that they had caused the company to transfer £7.2million for their benefit but this was at the risk of HMRC as there was an outstanding investigation.
Anthea Simpson, Chief Investigator for the Insolvency Service said:
This is a relatively unusual case as the conduct of the directors criticised occurred before HMRC had issued their determinations of Ethical Forestry’s liabilities.
However, the directors were aware that HMRC were investigating the tax planning scheme through which they had already drawn very substantial sums from the company, and yet in this knowledge they continued in the same vein for a further 12 months, taking an additional £7m. We considered that this was unacceptable rather than ethical, and amounted to unfit conduct which justified disqualification.
Simon Chaplin, Assistant Director – HMRC Counter-Avoidance, said:
HMRC welcomes the actions of The Insolvency Service in obtaining disqualifications in this case. Where directors cause companies to use tax avoidance schemes for personal benefit and put uncollected tax at risk they should be held accountable for their conduct.