Roman Abramovich, the Russian billionaire and former owner of Chelsea Football Club, is at the center of a tax evasion controversy involving his luxurious superyachts. His prized yacht, Eclipse, once the largest private yacht in the world, is valued at an estimated $700 million (£559 million). Investigative findings by the BBC and the Bureau of Investigative Journalism have uncovered a complex scheme that enabled Abramovich to avoid paying Value Added Tax (VAT) on the purchase and running costs of his yachts. This scheme involved a labyrinthine network of companies and leasing agreements across jurisdictions, notably Cyprus and the British Virgin Islands.
The investigation into Abramovich’s tax evasion scheme has revealed that his yacht, Eclipse, was chartered through a series of intricate transactions. The yachts were leased to a Cypriot company, Blue Ocean Yacht Management, which subsequently chartered them to companies in the British Virgin Islands controlled by Abramovich himself. The primary aim was to avoid millions of euros in VAT on both the purchase price and operating expenses of these opulent vessels.
Leaked files from MeritServus, a Cypriot corporate service provider, exposed the scheme's inner workings. According to these files, Abramovich's companies utilized a sophisticated structure of leasing agreements to evade tax obligations. These arrangements were meticulously designed to generate charters when necessary to cover expenses, thereby creating the illusion of legitimate business operations.
Jonathan Holloway, a key figure in the scheme, expressed intentions in a memo stating:
"We want to avoid paying VAT on the purchase price of the yachts and where possible to avoid paying VAT on goods and services provided to the yachts."
Holloway further emphasized:
"so that an investigator checking on our operation would see it as a legitimate structure."
However, VAT investigators found that Blue Ocean failed to provide evidence supporting claims of economic activity by the companies chartering the yachts. Despite assertions that Eclipse was used for commercial purposes, no substantial evidence was presented to corroborate these claims. Holloway acknowledged the potential risk involved, noting:
"We all have to recognise that a determined investigator could eventually discover this is an in-house structure with the possible consequences that would entail."
Abramovich's legal representatives maintain that he consistently sought independent expert professional tax and legal advice and acted upon it. Yet, a note from a Blue Ocean director highlighted within the leaked memo suggested that aligning expenses and income was deliberate:
"At the beginning of each week we will have a meeting in Blue Ocean where we will look at our current bank balances and our cash needs for the next 1~2 weeks [sic]. If we see a need for a cash injection we will raise an appropriate time charter and invoices."
This strategy underscores the intentional design behind the financial arrangements. The scheme aimed to create an appearance of legitimacy while effectively evading taxes on substantial expenditures.
The revelations surrounding Abramovich’s tax evasion scheme involve more than just financial machinations. His yacht Pelorus, another luxurious vessel, was notably lent to Chelsea footballer John Terry for his honeymoon in 2007. This incident highlights Abramovich’s generous gestures towards associates while simultaneously navigating complex financial structures.
In 2011, Eclipse was chartered by a company based in the British Virgin Islands, further complicating the trail of ownership and usage. Furthermore, Abramovich's companies employed a trust to distance Blue Ocean from other entities involved in the scheme, adding yet another layer to the intricate web of financial maneuvering.
Despite these revelations, Holloway defended his actions stating:
"I joined Blue Ocean 20 years ago and was there for a relatively short period of time."
He added:
"I can't be expected to remember the individual circumstances of every vessel I have ever managed," and clarified that he "used structures others in the industry were using."
Abramovich’s tax evasion scheme has drawn criticism from various quarters. An uncredited source succinctly concluded:
"My conclusion is that in the case, there has been a tax evasion… because all the parties know exactly what to do in order to hide the reality."
Rita de la Feria, an expert in tax law, noted:
"If that is the case, then we are now in the realm of evasion."
These expert opinions highlight the gravity of the situation and underscore potential legal consequences.
The fallout from this investigation extends beyond financial repercussions. In March 2022, Abramovich faced sanctions from the UK over his connections to Vladimir Putin’s regime. These sanctions intensified scrutiny over his financial dealings and further complicated his international business operations.