Lewis Hamilton ‘avoided’ VAT on £16.5million private jet

Formula 1 world champion Lewis Hamilton ‘avoided’ paying VAT on his £16.5million private jet, the Paradise Papers have revealed.

The 32-year-old, who won his fourth title last week, received a £3.7million refund for the Bombardier Challenger 605, which was imported into the Isle of Man.

Any private jet purchased outside the European Union is subject to 20% VAT, in order to move freely around the continent. 

Formula 1 world champion Lewis Hamilton ‘avoided’ paying VAT on his £16.5million private jet (pictured), the Paradise Papers have revealed

The 32-year-old, who won his fourth title last week, received a £3.3million refund for the Bombardier Challenger 605, which was imported into the Isle of Man

The 32-year-old, who won his fourth title last week, received a £3.3million refund for the Bombardier Challenger 605, which was imported into the Isle of Man

Under UK and EU legislation he would have been entitled to a VAT rebate on the jet if it was to be used purely for business purposes. 

However, documents suggest that around a third of Hamilton’s journeys were for private trips. 

How people use the Isle of Wight’s tax rules to avoid paying VAT 

The Isle of Man’s government took steps to implement tax avoidance schemes that have enabled the world’s super-rich to get tax breaks on jets.

Customs officials worked closely with Appleby and big four accounting firm EY to allow individuals to pay almost zero VAT on imports.

Jet owners are able to claim full VAT refunds, if they say that their business is leasing them out.

However, this loophole is easily exploited by owners leasing the planes to themselves to avoid paying tax.

The tiny island, which has a population of only 83,000, has the second largest jet register in Europe and is expected to notch up its 1,000th aircraft this year.

Leaked Appleby files suggest the loophole has been exploited by Osama bin Laden’s half-brother Bakr, as well as several people who are closely tied to Vladimir Putin and are currently subject to sanctions.

 

Hamilton’s lawyers said there had been no illegal activity, but admitted no VAT had been paid on the plane. 

The Mercedes star’s social media account shows him using the plane to jet off to holidays across the globe, while he has also posed on board with his two bulldogs, Roscoe and Coco. 

The accountancy firm EY and Appleby, the law firm at the centre of the Paradise Papers leaks, helped Hamilton and others set up seemingly artificial leasing businesses through which they rented their own jets from themselves.

Files leaked from Appleby suggest as much as £1.1m of the VAT he appears to have reclaimed on his jet should have been paid, along with hundreds of thousands due on the continuing costs of flying the jet.

The aircraft is now registered to a Hamilton company in the Virgin Islands, which in turn leases it to another in the Isle of Man, which in turn rents it to a screen company in Guernsey. 

They said his practice was to rely on professional advice, and he was not concerned with day-to-day management of his business, according to investigators working for the France 2 TV Channel.

Hamilton set up another Isle of Man company to buy a £1.5m motorhome that he used at racetracks. No VAT appears to have been paid on that purchase either.

Legitimate tax avoidance schemes are legal, and there is no suggestion Hamilton was directly involved in creating the scheme used for his jet. 

The Mercedes star's social media account shows him using the plane to jet off to holidays across the globe

The Mercedes star’s social media account shows him using the plane to jet off to holidays across the globe

Hamilton left the United Kingdom to live in Monaco and then Switzerland in 2007, so as to avoid paying excessive UK tax.

This year’s Sunday Times Rich List put his personal wealth at £131 million.

He said when it was published: ‘I race in 19 different countries, so I earn my money in 20 different places and I pay tax in several different places, and I pay a lot here as well.

‘I am contributing to the country and, not only that, I help keep a team of more than 1,000 people employed. I am part of a much bigger picture.’ 

Rita De La Feria, professor of tax law at Leeds University, told the BBC: ‘If private usage of the jet is being disguised as business usage of the jet, then what you essentially have is a tax avoidance scheme.

‘You’re using it for your own private interests, you’re going on holidays, meeting friends. You’re supposed to pay the tax on private consumption.’ 

The 32-year-old, who won his fourth title last week (pictured during the celebrations), received a £3.3million refund for the Bombardier Challenger 605, which was imported into the Isle of Man

The 32-year-old, who won his fourth title last week (pictured during the celebrations), received a £3.3million refund for the Bombardier Challenger 605, which was imported into the Isle of Man

The Paradise Papers dossier says cash was secretly funnelled to the Cayman Islands and Bermuda and revealed Bono, members of Donald Trump’s cabinet and businesses including Apple and Facebook also invested in tax havens. 

Irish U2 star Bono, the Queen, members of Donald Trump’s cabinet and some of the world’s biggest firms including Facebook are also named among the 13.4million confidential documents.

Dubbed the ‘Paradise Papers’, the leak is second only to last year’s Panama Papers and again exposes how the rich and powerful shield wealth offshore.

Hundreds of individuals and companies reportedly have had their overseas investments exposed by the files, which are also said to reveal that major global companies have exploited offshore schemes to avoid tax.

First obtained by the German newspaper Suddeutsche Zeitung, the documents stem from two offshore service providers and company registries from 19 tax havens, the Guardian reports.

The International Consortium of Investigative Journalists oversaw the project.

Paradise Papers Q&A: Millions of leaked secret corporate files that raise serious questions about the tax affairs of the rich and powerful

What are the Paradise Papers?

More than 13 million leaked secret corporate files, about half of which belong to offshore law and corporate services provider Appleby, which has ten offices around the globe.

There also documents from corporate registries in 19 tax havens. These are mostly Caribbean and Atlantic islands such as Bermuda, Grenada and the Bahamas, but also include Malta, Lebanon, Labuan (an island territory in Malaysia), Samoa, Vanuatu, the Cook Islands and the Marshall Islands. They cover the period between 1950 and 2016.

Is this the same as the Panama Papers?

The Panama Papers involved millions of files leaked from Panamanian law firm Mossack Fonseca, showing how some of their clients laundered money, dodged sanctions and avoided tax.

This is a separate leak, although will raise many of the same questions.

Who got the documents, and how?

The German newspaper Suddeutsche Zeitung obtained the files and shared them with 95 other media organisations around the world.

In all, 381 journalists in 67 countries have been analysing the material for one year. Suddeutsche Zeitung has not revealed its source.

What do the leaks contain?

Documents outlining the tax and financial affairs of hundreds of people and companies connected to Appleby and the 19 tax havens, with many appearing to have invested or sheltered huge amounts of cash in offshore tax havens.

Who do they involve?

Multinational companies, wealthy individuals, heads of state, politicians and sports stars from around the world, including many from the UK.

Some of the biggest names to emerge so far include the Queen, Facebook and Donald Trump’s cabinet members and advisers.

Why is it controversial to put money offshore?

Offshore tax havens typically offer low or zero tax rates to non-residents who keep money there.

Experts estimate that around $10 trillion (£7.6 trillion) is held offshore around the world.

That money would potentially otherwise be taxed in the owner’s home country, meaning governments are potentially missing out on billions in revenue.

Critics also say the secrecy makes it easy for companies to hide wrongdoing.

Will this cause a row about tax avoidance?

Further evidence of the extent of cash being held in tax havens is certain to spur anger and calls for a crackdown on tax avoidance practices.

However, recent leaks including the Panama Papers may have created a certain level of ‘leak fatigue’, denting the documents’ impact.

 

 

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