How Lewis Hamilton got a £3m VAT refund on his jet
FORMULA one world champion Lewis Hamilton allegedly used an elaborate ruse to avoid taxes on his private jet – taking advantage of an Isle of Man scheme being probed by the treasury.
Millionaire Hamilton – one of the world’s wealthiest sportsmen – bought a top-of-range cherry-red Bombardier CL-600 in 2013 for £16.5 million. But according to the ‘Paradise Papers’, he was able to claim back the entire £3.3million VAt bill by using a complex leasing structure.
this effectively involved Hamilton setting up a leasing business on the Isle of Man and importing the jet there. this company then rented the aircraft back to him via a third-party management firm. on the basis of the transactions, Hamilton’s advisers were able to claim a 100 per cent VAt refund on the £3.3 million he was obliged to pay at the point of importation.
But the BBC said the leasing agreements suggested Hamilton was going to be use the plane for 80 hours a month, with his company using it for 160 hours. there is a UK and EU ban on VAt refunds for private use, so if this estimate had been used for the basis of the VAt refund, only the two thirds related to business use could have been considered for a refund.
the ploy was described as ‘ abusive’ by tax experts, although there is no suggestion Hamilton has acted illegally, or that he had personal knowledge of the scheme to avoid tax, instead relying on expert advice. Hamilton’s lawyers told the BBC a review found the structure was lawful. they added it was not correct to say no VAt had been paid on any of the arrangements.
Private planes bought outside the EU are subject to 20 per cent VAt on importation in order to qualify for free circulation across the continent. But because the Isle of Man is a British Crown Dependency and forms a common VAt area with the UK, an aircraft imported via the island is granted full access to the bloc.
to try to get round EU and UK rules banning VAt refunds on aircraft used by private individuals, Hamilton’s advisers allegedly formed a VAt-registered leasing business on the Isle of Man.
the new company – Stealth (IoM) Ltd – leased the jet from Hamilton’s British Virgin Islands company, Stealth Aviation Ltd, which had bought the jet, and imported it to the Isle of Man. It was then leased to a UK company that pro- vided Hamilton with a crew and other services, and which leased the plane back to him.
Rita de la Feria, chairman of tax law at the University of Leeds, told the Guardian: ‘the only reason I can see for setting up these schemes is to hide private use and not pay VAt on it. If there was private use, this is clear- cut avoidance.’ Edoardo traversa, a tax expert and law professor at Louvain University in Belgium, added: ‘ the entire scheme seems abusive to me.’
Hamilton left the UK to live in Monaco and then Switzerland in 2007. this year’s Sunday times Rich List put his personal wealth at £131 million.