Blackstar (Europe) Limited – ‘E’ Shares Tax Avoidance Scheme
What Is Happening Now?
FS Litigation’s specialist tax litigation team is advising individuals and former employees affected by the Blackstar ‘E’ Shares Tax Avoidance Scheme, following HMRC assessments and enforcement activity.
The schemes were marketed by Blackstar (Europe) Limited (in Liquidation) through accountants and IFAs, who often received undisclosed commissions for recommending the arrangements to long-standing clients.
We have been instructed in numerous claims against the professional advisers who introduced the scheme.
We also work with a team of external tax experts to help protect our clients’ positions when engaging with HMRC.
How the Scheme Worked
Known as the ‘E’, ‘F’ or ‘P’ Shares Scheme, this strategy involved the issue of shares at par value to employees, who were then either loaned or gifted the subscription amount by the company.
For example, an employee could acquire 1 million £1 shares for £10,000 (1p per share), funded entirely by the company, and retain £990,000 in personal hands. It was promoted as tax-free to the employee and deductible for corporation tax purposes.
In reality, this was a form of disguised remuneration, vulnerable to challenge under PAYE and NIC legislation.
It is estimated that over 1,000 individuals may be affected, with total losses potentially exceeding £1 billion.
HMRC’s Response
Unsurprisingly, the scheme was challenged by HMRC as a payment of disguised remuneration, with tax and NIC assessments being raised against the company and/or individual employees.
Further, should the company become insolvent, the liquidator of the company would have the right to call in outstanding payment of the shares (£990,000) which were then worthless. This leaves the employee with an unplanned liability to the company and HMRC of up to around £1.5m, which obviously can cause severe personal hardship.
Tax barrister George Rowell of Exchange Chambers comments:
“E Shares was always highly risky as it fell within the Disclosure of Tax Avoidance Schemes legislation. This meant that it was bound to be challenged when HMRC received the client’s tax return, leading to a stressful tax enquiry lasting several years and eventually a large tax assessment. Clients were often given totally inadequate warnings of such risks when their accountant or IFA persuaded them to sign up to the scheme.”
Wider Legal Risks
Where companies have since entered liquidation, liquidators have pursued the recipients for repayment of the unpaid share capital — leaving individuals facing combined HMRC and liquidator demands exceeding £1.5 million in some cases.
FS Litigation’s Expertise
FS Litigation is one of the UK’s few law firms specialising in claims arising from failed tax schemes and negligent financial advice.
We have successfully pursued claims against accountants and tax advisers who recommended the Blackstar Scheme without proper warnings or explanation of the risks.
We are ranked Band 1 by Chambers & Partners and recognised by The Legal 500 for our work in this field.
We are ranked Band 1 by Chambers & Partners and recognised by The Legal 500 for our work in high-value tax-related litigation.
Chambers & Partners: “The team is especially skilled acting on high-value tax-related disputes.”
Legal 500: “FS Litigation has a national reputation for high-profile, multi-million pound ‘big ticket’ litigation... its team is the envy of many of the top law firms it comes up against.”
What Should You Do?
If you participated in the Blackstar ‘E’ Shares scheme or believe your adviser introduced you to it, early legal advice is essential. Strict time limits may apply.
FS Litigation offers a free, confidential consultation and is acting on a full ‘no win, no fee’ basis for participants in this scheme.
Funding Options
FS Litigation offers a range of funding solutions and acts on a contingent (‘no-win, no-fee’) basis in the majority of our professional negligence cases.
Contact Us
To speak confidentially with a member of our team, please contact us or call us on 0161 714 4520