The multimillionaire founder of Matalan is suing his accountants for allegedly giving him ineffective tax avoidance advice – weeks after his retail empire received tens of millions of pounds of taxpayer support during the Covid-19 pandemic.
John Hargreaves claims the big four accounting firm PwC was negligent when it advised him on how his move to Monaco in 2000 would avoid capital gains and income taxes when he sold £237m worth of shares in the company.
The tycoon – whose family is worth £550m, according to the latest Sunday Times rich list – sold the shares after Matalan was floated on the London Stock Exchange in 1998. He claims he followed the advice of his “trusted tax advisers” on how to relocate to the tax haven and then offload the shares in one bulk transaction just months later.
However, the arrangements led to a lengthy legal battle with HM Revenue & Customs.
Hargreaves’ claim against PwC was put on hold while the case with HMRC was running. But the case’s revival comes at a time when his 232-store chain is being supported by millions of pounds of taxpayer money and guarantees.
The business has furloughed more than 11,000 staff, as well as deferring tax and national insurance payments and accessing “the 12-month business rates exemption worth over £40m”.
It has also asked its lenders to borrow £50m as part of the coronavirus large business interruption loan scheme (CLBILS), in which the government guarantees 80% on each bank loan.
The company declined to comment on the total amount of taxpayer support it is receiving.
In filings at the high court, which were first reported by the Financial Times, Hargreaves claimed he “relied” on advice from PwC and believed he had taken the steps necessary to become a non-resident of the UK.
“[Hargreaves] is cautious and risk-averse in relation to tax matters. Based on [PwC’s] advice he believed his actions were proper, legitimate and effective,” the filings said.
The 76-year-old paid out £35m to HMRC in 2018 after a 13-year legal dispute that began when the tax authority launched an investigation into the businessman because he was still working at Matalan’s Liverpool head office three days a week.
PwC said it believed its advice was sound and that it would be defending the claim, which the accountancy firm also argued was now too old to be brought. A spokesman added: “We believe this claim will ultimately fail and are seeking to strike out aspects of the claim.”
Matalan has begun to bring staff back to work after beginning to reopen its stores.
Hargreaves took Matalan private again in 2006 and was paid a £250m special dividend in 2010. The business began as a Liverpool market stall in 1985.
Last year Hargreaves won a case against HMRC, which had continued to pursue the businessman for about £84m in taxes relating to the Monaco move. A judge ruled the case was too old for HMRC to make a claim, although the it has been allowed to appeal.