Leaked documents reveal that Roman Abramovich may owe the UK government as much as £1 billion in taxes due to profits generated from hedge fund investments over nearly two decades. The documents suggest that Abramovich's investments, made through a series of companies in the British Virgin Islands (BVI), resulted in an estimated $3.8 billion (£3.1 billion) in profits. The BVI, known for not levying tax on corporate profits, served as the base for these financial activities, raising questions about the tax implications for the UK.
Eugene Shvidler, a former director of Chelsea FC and a billionaire businessman, reportedly played a crucial role in these investment decisions. Shvidler, a UK resident who gained British citizenship in 2010, was granted sweeping powers over Abramovich's BVI companies, including authority over investment decisions and financial management. This involvement has prompted questions about whether the profits should have been taxed by the UK.
The investigation, part of the International Consortium of Investigative Journalists' Cyprus Confidential project, highlights a network of BVI companies that invested up to $6 billion (£4.8 billion) in Western hedge funds from the late 1990s to the early 2020s. The profits flowed back into Abramovich's companies and eventually into Keygrove, their parent company. The leaked documents contain complete accounts for the hedge fund investments from 2013 to 2018.
Tax expert Rita de le Feria commented on the situation, noting "strong evidence that the effective management of the company was not taking place in the BVI." She pointed out that evidence of a UK resident like Shvidler making "strategic big decisions" indicated that the profits should have been subject to UK taxation.
"a pretty big smoking gun" – Tax expert Rita de le Feria
Shvidler's lawyers have contested these claims, arguing that there is "no question of Mr Shvidler, either knowingly or negligently, being involved in an unlawful scheme to avoid paying tax." They assert that the structure of investments was "the subject of very careful and detailed tax planning, undertaken and advised on by leading tax advisors."
"the structure of investments" was "the subject of very careful and detailed tax planning, undertaken and advised on by leading tax advisors" – Lawyers for Mr Shvidler
The leaked documents also reveal that general power of attorney documents granted Shvidler "full power to do everything and anything," further emphasizing his significant role in managing the BVI companies’ finances.
"full power to do everything and anything" – General power of attorney documents
Abramovich's lawyers maintain that he "always obtained independent expert professional tax and legal advice" and "acted in accordance with that advice." They expect similar advice was sought by all parties involved.
"always obtained independent expert professional tax and legal advice" – Lawyers for Mr Abramovich
"acted in accordance with that advice" – Lawyers for Mr Abramovich
The investigation suggests that Abramovich's potential £1 billion tax bill could exceed the £653 million bill imposed on Formula One boss Bernie Ecclestone in 2023. The scheme appears designed to minimize tax liability by routing investments through BVI companies.
The leaked documents also show that Shvidler's lawyers criticized the BBC's reporting, claiming it was based on "confidential business documents that present an incomplete picture" and accused the media outlet of drawing "strong and erroneous conclusions" regarding Shvidler's conduct.
"confidential business documents that present an incomplete picture" – Shvidler's lawyers
"drawn strong and erroneous conclusions as to Mr Shvidler's conduct" – Shvidler's lawyers
As the investigation unfolds, it hints at financial implications for both British taxpayers and Ukrainians awaiting payments from Abramovich. The potential £1 billion tax bill has sparked interest and scrutiny from various stakeholders.