Leaked documents suggest oligarch’s billions were managed from UK, undermining offshore tax avoidance plan.
Roman Abramovich may owe as much as a billion pounds in UK tax and potential penalties on profits made through a vast offshore hedge fund operation, the Bureau of Investigative Journalism can reveal after an analysis of leaked documents.
If HMRC found wrongdoing and levied the maximum penalties available, this would surpass former F1 boss Bernie Ecclestone’s £653m record tax settlement last year.
Between the late 1990s and early 2022, the billionaire – who is now sanctioned in the UK and EU – held as much as $6bn in a global network of hundreds of hedge funds. The sums totalled nearly half his estimated fortune.
These generated huge returns, which were then used to bankroll other parts of his business empire – including his financing of Chelsea Football Club.
Now a joint investigation with the BBC and the Guardian based on documents from Cyprus Confidential, the project led by the International Consortium of Investigative Journalists and Paper Trail Media, reveals evidence that Abramovich may have avoided huge amounts of UK tax on the profits by skirting “corporate residency” rules.
The investments were structured through a series of British Virgin Island companies, which ultimately belonged to a Cypriot trust of which Abramovich was sole beneficiary. A so-called tax haven, the BVI does not levy taxes on profits generated by businesses registered there.
However, leaked documents and filings from the US financial regulator suggest that investment decisions were not really taking place in the BVI. Instead, one of Abramovich’s closest associates appears to have been controlling the companies from the UK.
UK tax laws state that a company’s residence – and therefore its tax jurisdiction – is based on where it is centrally managed and controlled. In other words, it’s about where the business decisions take place.
In simple terms, Abramovich’s companies were registered offshore but were apparently being run from the UK. That would mean they should have been paying UK taxes. The data is not always complete – and it’s possible some key elements were missing from the files reviewed by reporters. But, according to experts, the evidence is enough to raise serious questions.
While an exact figure is impossible to calculate, the total sums potentially owed are enormous. The Cyprus Confidential cache contains thousands of corporate documents laying out how Abramovich managed his enormous wealth. There is a window of time between 2013 and 2018 for which reporters were able to review a full set of financial accounts. Abramovich’s hedge fund investment companies recorded profits of $1.4bn in this period. Had a flat rate of UK corporation tax been levied, this alone would amount to over £200m.
Since the hedge fund operation lasted for over two decades, the real figure is likely to be much higher. Between 1999 and 2018, it’s possible to see the relevant companies made – at the very minimum – $3.8bn in profits.
Calculations based on UK corporation tax rates during that period give a minimum figure of £536m in unpaid tax.
On top of that, if HMRC were to deem the tax avoided or evaded, there could be penalties as well as interest. These could amount to about £1bn.
Representatives for Abramovich said he obtained independent professional tax and legal advice and acted in accordance with it. He denied knowledge of any unlawful tax avoidance or evasion scheme and said he was not liable for any scheme.
Offshore Network
Documents show Abramovich’s huge hedge fund investments date back to the late 90s, when he owned and managed the Russian oil giant Sibneft. The company’s 2005 sale to Russian state-backed oil company, Gazprom, netted Abramovich over $13bn, making him one of the world’s wealthiest men.
It was around the time of this sale that he began channelling billions of dollars into a BVI company he owned called Keygrove Holdings Ltd.
Keygrove lay at the centre of a complex web of investment holding companies. It owned more than a dozen other BVI companies, all set up to invest in hedge funds and other financial products. Sibneft money flowed into Keygrove, which injected the funds into these subsidiaries.
Huge profits accumulated in Keygrove, which then loaned the money out to other entities within Abramovich’s corporate network. Over $2bn went to a BVI company called Sonora Capital Holdings Ltd, which in turn lent money onwards to another offshore entity, Camberley International Investments Ltd.