John Hargreaves, the founder of popular retail chain Matalan, has recently suffered a major setback in his lengthy legal battle with HM Revenue & Customs (HMRC). Hargreaves has lost the case and now faces a substantial capital gains tax bill on the sale of £231 million worth of Matalan shares from May 2000. This ruling comes after nearly two decades of dispute surrounding Hargreaves’ tax residency status.

In 1998, Hargreaves took Matalan public on the London Stock Exchange. Two years later, he moved to Monaco, a well-known tax haven, and notified HMRC about his new tax status through a P85 form. According to court documents, Hargreaves omitted the capital gains pages in his tax return because he believed he was no longer a UK resident at the time of selling his Matalan shares. In his tax return, he indicated that he would spend a maximum of two months per year in the UK. However, it was later discovered that Hargreaves continued to work three days a week at Matalan’s Liverpool headquarters and resided in the same UK property as before his move to Monaco. In just the 2000-2001 tax year, Hargreaves spent a minimum of 152 days in the UK.

In January 2007, after consulting with his advisors, HMRC determined that Hargreaves owed £80 million in capital gains tax and an additional £4 million in income tax. This decision marked the beginning of a series of claims and counter-arguments between Hargreaves and HMRC, culminating in Hargreaves’ recent appeal in The Upper Tribunal, the highest court for tax cases. Unfortunately for Hargreaves, the tribunal ruled against him this month.

While a spokesperson for Hargreaves has stated that he is considering an appeal, HMRC has welcomed the ruling, emphasizing its support for the use of discovery assessments in high-value cases. HMRC has made it clear that it is dedicated to ensuring that everyone pays the correct amount of tax in a timely manner to contribute to essential public services.

The exact amount Hargreaves owes HMRC has yet to be determined, but with the inclusion of interest, it could potentially soar to £135 million. This significant tax bill is undoubtedly a major blow to the Matalan founder and highlights the ongoing importance of tax compliance and transparency for individuals with high net worth.

Useful links:

1. HM Revenue & Customs (HMRC)
2. Capital Gains Tax Overview