by Mick the Ram

Russian billionaire Roman Abramovich could potentially owe the UK over £1 billion after a scheme to avoid paying tax on an elaborate offshore hedge fund was uncovered.

The sanctioned former Chelsea FC oligarch has been found to have made investments worth upwards of £4.7bn which were routed through companies in the British Virgin Islands (BVI) between the late 1990’s and the early 2020’s.

Leaked papers provide evidence to suggest Eugene Shvidler – widely regarded as Mr Abramovich’s right-hand man and a former director at his football club – had been making strategic decisions on the investments while based in the UK and consequently the vast sums of money they were able to profit from, were in fact liable to be taxed in the UK.

Mr Abramovich – who now reportedly divides his time between Istanbul, Tel Aviv and the Russian resort of Sochi – denies having any knowledge or personal responsibility for any unpaid tax and his lawyers maintain that he always obtained independent expert professional tax and legal advice and acted accordingly.

An investigation is on-going and if it concludes that Mr Shvidler – a billionaire businessman in his own right and who became a British citizen in 2010 – was fully aware and complicit in non declaration of profits, then indeed the monies owed in tax could exceed the billion pound mark.

Year long investigation

The investigation being conducted by the Bureau of Investigative Journalism (TBIJ), alongside the BBC and Guardian newspaper, has been on-going for more than a year and has seen thousands of files and emails examined from a Cyprus-based company who administered Mr Abramovich’s global empire.

Mr Abramovich is known to have invested significant portions of his enormous fortune into networks of global hedge funds over a period of around 25 years and the returns on those investments were reportedly used to bankroll other parts of the oligarch’s business empire, which very publicly including Chelsea Football Club.

Huge profits

Leaked data appears to show how Mr Abramovich invested a large part of the wealth through a network of BVI companies owned by Keygrove Holdings Ltd, who ploughed up to £4.7bn into Western hedge funds, making the Russian an estimated £3.1bn in profits, over almost two decades.

By acting through companies in the BVI, which does not levy tax on corporate profits, the scheme appears to be set up to ensure as little tax as possible was paid.

Normal practice, but….

It is not unusual practice for businesses to legally avoid paying tax on their profits by making their investments from companies in tax havens.

However, those companies involved must be managed and controlled offshore where they are incorporated.

Therefore, if an offshore company’s strategic decisions are being taken by someone in the UK, its profits almost certainly should be taxed as if it were a UK company.

Keygrove money flowing through Chelsea FC

The investigation has found that Keygrove loaned out money to other companies in Mr Abramovich’s network, which in turn lent money to Camberley International Investments Ltd – a company set up to bankroll Chelsea FC.

By 2021, when Chelsea had been hugely successful both domestically and on the European stage, hundreds of millions of pounds in loans made to the club could be traced back to companies benefiting from Mr Abramovich’s untaxed hedge fund investments.  

Power of attorney

The information obtained seems to indicate how the directors of the BVI investment companieshanded sweeping powers held over them to Mr Shvidler, who had been a British citizen from 2010 onwards.

There appears to be evidence that documents exist giving him “full power to do everything and anything” to certain investment companies in the BVI, including crucially – Keygrove.

UK citizen

Mr Shvidler moved to the USA after Russia’s invasion of Ukraine, but from 2004 until 2022 he lived in the UK, with properties in London and Surrey.

Lawyers acting on his behalf said “the structure of investments” was “the subject of very careful and detailed tax planning, undertaken and advised on by leading tax advisors.”

Outstanding tax could be over billion pounds

In the UK the chair of parliament’s cross-party group on responsible tax has called on His Majesty’s Revenue and Customs (HMRC) to “thoroughly investigate” the case.

Were they to conclude that Mr Abamovich’s companies had failed to pay the massive tax sum believed to be owing, they would almost certainly also charge interest on the total avoided, and in addition those companies/individuals who do not disclose their tax liabilities voluntarily, are subject to late payment penalties of up to 70% of the unpaid sum, if the failure is deemed deliberate.

It is estimated that depending on their findings and their interpretation regarding the severity of the case, HMRC could demand anywhere between £650m and £1bn – possibly even higher, although when a liability is due, some of it could be time-barred due to the length of time that has passed.