Scottish companies that used tax-avoidance schemes run by a leading accountancy firm could face combined tax bills of up to £400 million to settle with HMRC and avoid the schemes being challenged.
Premier Strategies, a division of RSM Tenon, is estimated to have sheltered up to £1 billion for dozens of sizeable Scottish companies over the past decade, avoiding £400m of taxes. But it is now inviting clients in its employee benefit trusts (EBTs), its best-selling product, to settle with HMRC at a predicted cost of 40% of their sheltered cash.
The advice comes amid speculation that the tax tribunal decision in favour of Rangers – that its EBT was legal – could be overturned later this year on appeal.
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The Public Accounts Committee last week warned that £10bn of tax was at risk from avoidance, and said "HMRC has allowed a system to evolve where the dice are loaded in favour of the promoters of tax-avoidance schemes". Its report puts more pressure on Chancellor George Osborne to tighten the screws on personal as well as corporate tax avoidance in next month's budget.
However, RSM Tenon, the UK's seventh largest accountant, which reports its results tomorrow, shut down Premier Strategies last year after Mr Osborne's promise in the 2012 budget to bring in a new general anti-avoidance rule.
Premier clients had been told that its schemes were approved by barristers or "Revenue approved", and that Premier had "never lost a case", according to expert sources. But the MPs' committee pointed out that all scheme promoters profited by "deliberately taking advantage of the time lag", usually of several years, between schemes being launched and being challenged by HMRC.
One tax expert said: "If a company saves £1m in tax in a year, they may have turned it into £1.5m before they eventually have to pay any tax – though it will have cost 6% to 12% in fees. The firms are quite clever – the schemes are not guaranteed, and the fees are not refundable."
He added: "In my experience most clients don't just do this once, they did it repeatedly. My concern would be if a company sheltered £1m a year for five years, they will now have to find £2m within the next 12 months. In the current climate that could put some otherwise successful Scottish firms out of business."
Premier EBT clients have received a letter warning: "We have recently been in correspondence with HMRC about the implications of the Rangers case. HMRC is continuing to challenge EBT cases."
The tax expert commented: "The appeal is in front of a single judge and HMRC could well prevail."
Premier's letter tells clients they have a 20% chance of winning outright at a tax tribunal, a 60% chance of a partial victory, and a 20% risk of HMRC winning outright. In a partial victory, the business might still have to pay up £400,000 for every £1m sheltered – yet a negotiated settlement with HMRC would probably cost £412,000 for every £1m, the letter claims.
Premier, which has no staff of its own, is offering to represent clients in negotiations with HMRC. Businesses are urged to "use the attached form to advise us of your decision as due to the high volume of clients we cannot track responses received in other formats".
A spokesman for RSM Tenon said: "Premier Strategies closed to new business in March 2012, and the former directors of Premier Strategies no longer work for RSM Tenon. Support to clients is now provided by RSM Tenon staff." The company chose not to comment on the letter to clients.
Premier is estimated to have done half of its business out of Tenon's Scottish offices, particularly Glasgow and Aberdeen. It hiked its sales from £2m to £37m over the six years to 2008, earning for Premier co-founder Mark Edmond a £3.6m pay-out, twice the aggregate remuneration of the RSM Tenon board.
But in 2012 profits crashed from £1.1m to £122,000. Mr Edmond is understood to be one of the former directors revealed in the Premier accounts to be suing for unpaid bonuses, along with another claim from Peak Performance, the Perth-based company that devised the K2 scheme used by comedian Jimmy Carr, for unpaid commissions.
The claims totalling £2m, which the accounts say Tenon will "resist robustly", were revealed last October when Tenon staved off potential collapse with a new £93m debt ceiling from Lloyds Banking Group, which owns 10% of the shares.
Andy Raynor, the group's chief executive since 2002, quit 13 months ago along with chairman Bob Morton as Tenon was forced to restate its own accounts. Tenon shares started 2011 at 65p but are now at 6.3p. In October it reported a loss of £102m after a £64m writedown of acquisition costs, and a £10m increase in debt to £78m.