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Businessman who fought for asylum in UK as a child wins High Court battle over £850,000 tax bill
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- Hossein Mehjoo made £8.5m from selling Bank Fashion Limited in 2005
- Should have paid capital gains tax on proceeds equal to bill of £850,000
- Born in Tehran and came to boarding school in West Yorkshire aged 12
By Becky Barrow
PUBLISHED: 03:08 EST, 11 June 2013 | UPDATED: 03:17 EST, 11 June 2013
Businessman: Hossein Mehjoo made an eye-watering £8.5million from the sale of his successful clothing business, Bank Fashion Limited, in 2005
He came to Britain as a 12-year-old Iranian refugee and claimed he would get ‘a bullet in the head’ if he was forced to return to his homeland.
But Hossein Mehjoo has triggered fury after winning a High Court battle allowing him not to pay a penny in tax from selling the business that he subsequently set up.
The 53-year-old made an eye-watering £8.5million from the sale of his successful clothing business, Bank Fashion Limited, in 2005.
On the proceeds, he should have paid capital gains tax, then charged at 10 per cent, equal to a bill of around £850,000.
To many people, this is the least he should have done after a campaign in the early 1980s battled to keep Mr Mehjoo, who was facing deportation back to Iran, in this country.
At the time, he insisted: ‘If they send me back, I can only expect a bullet in the head. I am terrified of going back. I will fight this all the way. If necessary, they will have to handcuff me and drag me to the aircraft.’
But, despite being rescued by Britain after being granted the right to stay by the Home Office in 1982, he went onto to do everything possible to avoid paying his fair share of tax.
When Mr Mehjoo sold his business, he used a tax-avoidance scheme to try to avoid paying capital gains tax. When this scheme failed, he sued his accountants, Harben Barker, for failing to put him into a different tax-avoidance scheme which would have worked.
Abode: In September 2005, just a few months after selling his business, he bought a £1.33million house - with two tennis courts - in the exclusive village of Barnt Green in Worcestershire
Following his extraordinary High Court victory last week, Mr Mehjoo, is set to scoop more than £1.2million.
This includes around £764,000 for some of the capital gains tax that he was forced to pay when the first tax-dodging scheme failed, £180,000 for the cost of setting up the first tax-dodging scheme which failed and around £230,000 for the interest paid to HM Revenue and Customs for late payment of the capital gains tax bill.
Mr Mehjoo, who was a professional squash player before setting up his clothing empire, already enjoys a gold-plated lifestyle, including an exclusive yacht.
In September 2005, just a few months after selling his business, he bought a £1.33million house – with two tennis courts - in the exclusive village of Barnt Green in Worcestershire.
It has been extensively renovated from the black-enamelled Aga cooker in the kitchen to chandeliers in the hallway, described by one visitor last year as having ‘a wow factor’ in every room.
Nicola Smith, head of economics at the Trades Union Congress, said: ‘This case illustrates how out of control Britain’s tax dodging industry has become.
Victory: Hossein Mehjoo won a battle at the High Court (pictured) allowing him not to pay a penny in tax from selling the business that he subsequently set up
‘Our tax laws are simply not fit for purpose as they are too easily avoided by those who can afford to dodge them.
‘The Government needs to wrestle back control of our tax system from accountants, big companies and super-rich individuals so that everyone starts paying their fair share.’
'Our tax laws are simply not fit for purpose as they are too easily avoided by those who can afford to dodge them'
Nicola Smith, Trades Union Congress
Overall, Britain is being robbed of around £32billion a year by cheats who refuse to pay their taxes and others who find ways of avoiding them, according to HMRC.
Meanwhile, cash-strapped families and young workers saddled with other debts from mortgages to overdrafts are managing to pay their taxes despite struggling to make ends meet.
Last Wednesday, Judge Silber said Mr Mehjoo’s accountants should have referred him to a non-domicile specialist as they did not have the relevant expertise.
Mr Mehjoo, who was born in Tehran and came to boarding school in West Yorkshire at the age of 12, is a non-domicile, which brings with it significant tax advantages.
Returns: Overall, Britain is being robbed of around £32billion a year by cheats who refuse to pay their taxes and others who find ways of avoiding them, according to HMRC
If he had been advised to go into a ‘Bearer Warrant Planning’ scheme – a tax-saving scheme only available to non-domiciles – Mr Mehjoo would not have paid any capital gains tax.
Unlike the tax-dodging scheme which he was put into, a ‘Capital Redemption Plan’, which failed, forcing him to pay the tax bill that he had tried to avoid, BWPs were successful at the time. The loophole has subsequently been closed down.
'If a case goes to the courts, it must follow the law, even if everybody thinks the law comes out with an immoral answer'
Tina Riches, Chartered Institute of Taxation
Tina Riches, a director of the Chartered Institute of Taxation, said: ‘If a case goes to the courts, it must follow the law, even if everybody thinks the law comes out with an immoral answer.’
An HMRC spokesman said: ‘It would be very dangerous to draw any general conclusions about the use of avoidance schemes from a specific case.
‘Most schemes simply don't work and HMRC effectively challenges avoidance across the board. You can be left with considerable costs including tax penalties on top of the tax and interest that should have been paid in the first place.’
Mr Mehjoo’s accountants, Harben Barker, plan to appeal.