Monaco-based Matalan founder loses fight with taxman over ‘£135m’ tax bill

Matalan founder John Hargreaves has lost a long-running dispute with HMRC over his bid to avoid a tax bill of up to £135m.

The retail entrepreneur has been ordered to pay after a court ruled he owed capital gains tax in relation to his £231m sale of Matalan shares in 2000.

Mr Hargreaves has been embroiled in a row with officials over his tax status for almost twenty years. He faces paying capital gains on the share sale plus interest. A final sum has not been determined but it could reach £135m. He has also sued PwC for allegedly providing bad advice on how to become a tax exile.

The businessman first moved to Monaco two years after floating Matalan on the London Stock Exchange. He launched Matalan as a shop in Preston in 1985.

He started living in a suite in Monaco’s Le Meridien Hotel in March 2000. He submitted a P85 form to HMRC outlining his tax haven status four days after arriving and signed a lease on an apartment six months later.

The court ruling said: “Part of Mr Hargreaves’ object in moving to Monaco was to ensure that he was no longer resident in the UK for tax purposes so that he could dispose of shares without becoming liable to capital gains tax.”

Mr Hargreaves pressed ahead with the sale of Matalan shares in May 2000. Court documents reveal he did not fill out the capital gains pages in his tax return because he did not consider himself a UK resident. 

But he continued to work in Liverpool three days a week as executive chairman of Matalan. He also maintained a property in the UK. Court documents reveal he spent some time in the UK on 152 days in the 2000-1 tax year.

Tax officials started probing Mr Hargreaves’ tax affairs in 2004, but they missed a deadline to start an investigation before 31 December 2003.

HMRC later launched negotiations with Mr Hargreaves and his advisers. They told him to pay capital gains tax worth £80 million and income tax worth £4m in January 2007. 

Mr Hargreaves, whose net worth stands at £600m according to the Sunday Times’s 2019 Rich List, has previously argued he was not a UK tax resident when he sold the shares. He has also previously said the tax bill was not valid because HMRC missed its deadline to investigate.

The Upper Tier Tribunal – the highest court that oversees tax cases – ruled against Mr Hargreaves’ latest appeal on February 11. He has three weeks to take the case to the Court of Appeal.

A spokesman for Mr Hargreaves said: “Mr Hargreaves is actively considering appealing this latest judgement. It would be inappropriate to comment further at this stage in the process.”

The First Tier Tribunal – a lower court for tax cases – ruled that Mr Hargreaves omitted information from his tax form that would have triggered a timely investigation. It concluded that the tax form did not indicate he could be liable for capital gains tax. 

The Upper court said: “The information did not, for example, make it clear how and when Mr Hargreaves used the Coach House property available to him in the UK. It did not refer to the fact that Mr Hargreaves continued to work as executive chairman of Matalan, a large UK company, and it did not give information on his pattern of work.” 

Mr Hargreaves already paid £35m to HMRC in 2018. HMRC uses so-called discovery assessments to probe tax statements after receiving new information.

A HMRC spokesman said: “HMRC welcomes this long-awaited ruling which supports our use of discovery assessments in these high-value cases, and we are committed to ensuring that everyone pays the right tax at the right time to help fund our vital public services.”

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