This Matalan Tycoon Is Suing PwC Over Bad Advice Regarding Using Monaco as a Tax Haven
John Hargreaves, a famous tycoon of Matalan, claims that accounting firm PwC, or PricewaterhouseCoopers, gave bad tax avoidance advice. Hargreaves has filed a lawsuit against PwC, and the big four accounting firm denies negligence with regards to its tax advice. For those from outside the United Kingdom or unfamiliar with the brand, Matalan is a discount housewares and clothing chain. The Matalan business began in 1985 as a Liverpool market stall.
Back in 2000, the firm suggested to John Hargreaves that he move his investments to Monaco. This lawsuit comes just weeks after his retail business gained millions of pounds in taxpayer support during the coronavirus pandemic. He decided to relocate to Monaco on the advice that it would help him avoid capital gains and income taxes for selling shares of his company, worth over 237 million euros.
Not the Best Timing for the Lawsuit
His lawsuit comes after the HM Revenue & Customs claimed Hargreaves was still a resident of the UK and therefore has millions of pounds of tax debt. Even after paying 35 million pounds a couple of years ago, the company is still in debt for another 135 million pounds.
Basis of the Suit
Hargreaves claims that by relying on PwC’s advice, the company was exposed to an unusually high tax amount.
At hearings this week, it was evident that PwC was seeking to use technical grounds to squash the case. This is not the ideal time for the accountants as they fight claims of negligence on the Providence Investment Fund. PwC allegedly signed off the books of the Providence Investment Fund before the discovery of a massive “Ponzi scheme” that left investors 40 million pounds short.
Hargreaves has an estimated family fortune of more than 550 million pounds, according to a recent Times rich list, and the tycoon sold the shares after the Matalan stock was floated on the exchange in 1998. He claims his trusted tax advisors told him to relocate to the tax haven and unload shares a few months later.
This arrangement ended up leading to a drawn-out legal battle between the tycoon and HM Revenue & Customs.
The Taxation Context
The case was put on hold, and the revival came at a time when Hargreaves’ chain of 232 stores is receiving millions in taxpayers’ guarantees and money. They are utilizing the “12-month business exemptions” and deferring national insurance payments and tax while furloughing more than 11,000 staff members. They have also asked the lenders for 50 million euros as part of the coronavirus stimulus, guaranteeing 80% on bank loans.
When asked about the total amount of taxpayer support it is receiving, the company declined to comment.
Possibilities for the Future
Hargreaves, by nature, is risk-adverse and cautious with regards to tax matters. Because of PwC’s advice, he believed he had made legitimate, effective, and proper actions. After a 13-year legal dispute, 35 million euros were paid to the HMRC by the 76-year-old businessman. This came after an investigation was launched into Hargreaves because he was still working three days a week at Matalan’s head office in Liverpool while sleeping at his home in the UK despite claiming to be a Monaco resident.
PwC still backs its advice, arguing the claim is too old to be brought now. A spokesman added, “We are seeking to strike out aspects of the claim and believe it will ultimately fail.”
Just last year, Hargreaves won against the HMRC in a case relating to the Monaco move. The judge ruled the case was too old for HMRC to use in making a claim, but an appeal is possible.
Did you find this article useful?
Subscribe to our newsletter for more!