Russian oligarch Roman Abramovich, under international sanctions, may owe the UK as much as £1 billion following a failed attempt to evade taxes on hedge fund investments. Leaked documents reveal that investments amounting to $6 billion (£4.7 billion) were funneled through British Virgin Islands (BVI)-based companies, but it appears these investments were actually managed from the UK, meaning they should have been subject to UK taxation.
Abramovich's legal team has responded by claiming that he "always sought independent expert professional tax and legal advice" and "acted in accordance with that advice." He denies any knowledge of or responsibility for unpaid taxes.
The tax investigation centres on the structure of Abramovich's hedge fund investments, which were routed through the BVI to minimize tax liabilities. A key figure in the situation is Eugene Shvidler, a billionaire businessman and former director of Chelsea FC. Shvidler, who had close ties with Abramovich, was involved in making investment decisions for the BVI companies while residing in the UK. The leaked documents reveal that Shvidler, rather than being based in the BVI, was actively involved in managing the investments from the UK.
A tax specialist involved in the case, Rita de le Feria, called the evidence of Shvidler's role in these decisions a "pretty big smoking gun," indicating that the profits should have been subject to UK tax. “That would be, again, strong evidence that the effective management of the company was not taking place in the BVI,” she said.
The investigation has led to significant scrutiny of Abramovich’s financial dealings, with the potential to recover substantial sums in unpaid taxes. Joe Powell, a Labour MP, has urged HM Revenue and Customs (HMRC) to "urgently" pursue the investigation to reclaim funds that could be invested in public services. According to Powell, the unpaid taxes could amount to "very significant amounts of money."
Documents also show how these untaxed profits flowed through various companies before reaching Chelsea FC. By 2021, when Chelsea won multiple prestigious football titles, hundreds of millions of dollars in loans to the club were traced back to companies that profited from Abramovich's hedge fund earnings.
HMRC could impose penalties and charge late payment interest if Abramovich and his associates are found to have failed in their tax obligations. The total amount owed could range from £700 million to £1 billion, depending on the findings of the investigation and whether any intentional evasion took place.
However, it is important to note that HMRC’s investigation can only go back a maximum of 20 years, meaning some of the tax owed may not be recoverable.
This ongoing investigation into Roman Abramovich’s hedge fund investments highlights the complexities of international finance and tax evasion schemes, with far-reaching consequences for those involved, including potential legal and financial repercussions.
