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UK Film Producer Jailed For Tax Evasion

by Jason Gorringe, Tax-News.com, London

20 June 2007


Elizabeth Mary Matthews was sentenced to 5-and-a-half years at Bristol Crown Court last week, after fraudulently obtaining repayments of VAT of more than GBP4 million.

Euan Stewart, Head of Criminal Investigation Operations, HM Revenue & Customs explained that: "This was a fraud committed on the back of a scheme designed to encourage the film industry in the UK. If it were not for the intervention of investigators some GBP40 million would have been fraudulently obtained from the VAT system. This is a further example of the determination of HMRC to combat organised attacks on the public revenue."

In a trial lasting twelve weeks, the court heard how, during the period from 1999 to 2002, Matthews had manipulated the business affairs of her group of companies, the Peakviewing Transatlantic Group, to obtain repayments of VAT to which she was not entitled, which she then used to prop up the finances of her business.

Miss Matthews was arrested in November 2001. Her group of companies went into liquidation at the end of 2002. The rights to the films which were produced have been transferred to a company registered in Holland, Peakviewing Beings BV.

In sentencing, His Honour Judge Lambert said that Matthews was: "Smitten with life as a film producer and continued driving on the business when it should have been abandoned."

He went on to comment: "You have ruined and disgraced yourself. A result of ambition giving way to obsession."

Judge Lambert also commended the HM Revenue & Customs officers for "the exemplary manner above and beyond the call of duty" in which they had handled this case.

This case was successfully prosecuted by the Revenue & Customs Prosecutions Office (RCPO). RCPO is an independent prosecuting authority that reports to the Attorney General, and is responsible for the prosecution of all HMRC cases in England and Wales.

The scheme employed by Miss Matthews involved the production of invoices and credit notes at times to coincide with the returns that the individual companies had to make to Customs and Excise in respect of VAT. It involved making use of a total of seven companies in England and three in the Isle of Man, all part of the Peakviewing Group, in order to create a circularity in sales and purchases in such a way as to allow the Group overall to benefit from repayments of VAT.

The Peakviewing Group companies, including the Isle of Man companies, were run from offices in Stonehouse, Gloucestershire. The Group purported to be involved in film productions costing over GBP275,000,000 between 1999 and 2002. Over GBP200,000,000 of that amount related to a series of five minute films under the "Viewing 4 Leisure" banner. The actual costs and value of those films was less than 10% of that figure. That was because the costs they claimed to have incurred were never in reality incurred in anything like the amount which was claimed.

Viewing 4 Leisure was destined to be used on the Internet or on terrestrial television and was designed to advertise leisure activities in many countries throughout the world. At the time that they were made the technology was not sufficiently advanced to allow the programmes to be shown. The vast costs involved in developing the product were to be funded by sale and leaseback deals. These were tax advantageous schemes designed to attract finance for the British film industry, and which allowed the film producer to obtain approximately 10% of the costs in cash once the film was made, so long as the film had been certified as a British film by the Department of Culture Media and Sport. By submitting costs for the films ten times the true value Matthews was able to recover almost all the costs of making the films without having to make any actual sales of the film product.

In 2004, the Department of Culture Media and Sport was successful in persuading the High Court to refuse certificates for these films. This led to the collapse of income tax schemes designed to take advantage of these inflated costs.

In order to provide evidence that the Viewing 4 Leisure series was worth the costs submitted to the DCMS, inflated invoices were passed between the companies within the Group. Taking advantage of the fact that the Group companies were required to make VAT returns at the end of different months throughout the year, Miss Matthews manipulated when she invoiced between the companies within the Group so as to ensure that each company in turn had higher purchases than sales, thereby causing Customs to repay the Group companies substantial amounts of money. Over the period in question, the amount reclaimed by the Group companies from Customs in the United Kingdom and the Isle of Man amounted to GBP39,000,000. In addition Matthews used a large number of credit notes to assist her in obtaining the steady stream of repayments from Customs.


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