Footballers in tax avoidance scheme lose negligence claim

Wealthy professional footballers who took part in a failed tax avoidance scheme have lost their claims of breach of contract and professional negligence against two banks.

The case centred on schemes advertised as vehicles through which taxpayers could contribute funds to limited liability partnerships for investing in films, offsetting their share of the partnership losses against other taxable income.

The investors were professional footballers who became clients of an independent financial adviser (IFA). The IFA introduced the investors to the schemes and told them they could borrow money from two banks to invest in them.

The footballers took out loans and opened accounts into which the loans were paid. HMRC disallowed the claims for loss relief.

The footballers brought claims of breach of contract and professional negligence against the banks. They claimed that their relationship with the banks was not a conventional one of banker and borrower because the loans were “packaged” together with the tax avoidance scheme.

The banks applied to have the claims struck out and the High Court ruled in their favour. It held that there was no evidence that the banks had contracted to provide anything wider than ordinary banking services.

Before the banks could be considered to have assumed responsibility giving rise to a duty of care to the footballers, there had to be some communication between them with the banks saying that they were assuming responsibility for the scheme. No such communication or reliance had been pleaded.

The case was different from those in which a defendant owed a contractual duty of reasonable skill and care and so the footballers’ claims should be struck out.

If you would like more information about contracts and professional negligence issues please contact David on 01228 516666.

By David Tew Solicitor

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