Melua "clueless" over tax scheme

Saturday 12 July 2014

Chart star Katie Melua has told how she was "clueless and inexperienced" when she followed the advice of experts to sign up to what turned out to be an aggressive tax avoidance scheme.

The singer was among around 1,600 people who were involved with the controversial Liberty tax strategy, but she went on to settle her tax in full with HM Revenue and Customs when it was brought to her attention.

Opening up about the furore for the first time today, she admitted it "sucks" that she has been under the spotlight for her part in it, and called for such schemes to be stopped to prevent others from being advised by experts to take part. Closest Thing To Crazy singer Melua was on a list of figures - including celebrities, doctors and judges - given to The Times after they put around £1.2 billion into the scheme from 2005 until 2009. The arrangement created a tax loss for investors which they could offset against other income.

Other celebrities have not responded to the claims that they were involved, but Melua was upfront and told how she pulled out as soon as she was made aware of the nature of the scheme and then paid her full tax liability.

Writing about the issue on her website today she explained: "At 19 I was lucky enough to start making money from my music career, and when I was in my early twenties I trusted financial experts and advisors to guide me with how I invested money. That I was fairly clueless and inexperienced when it came to finance goes without saying and, I'm embarrassed to admit, not as interested in it as I should have been. My focus was, and still is, totally on making music, getting on the road and performing live.

"From what I can remember in 2008 when the Liberty scheme was presented to me it was not presented as 'an aggressive tax avoidance scheme.' It was presented as an 'investment scheme' that had the potential to legally reduce yearly income tax. Totally legal and legit and my accountants and advisors would take care to complete the formalities which included dealing with HMRC. Seemed pretty straightforward and simple, so I signed up."

Melua came in for criticism from Christian Aid when her name emerged earlier this week after it had listed her among nominees for its "tax super hero" award four years ago. By that point the Georgian-born singer - who has adopted British citizenship - is understood to have paid her tax in full.

The charity issued a statement to say it was "disappointed" to hear she had been involved and suggested she was a "fallen hero". But it has now led to a backlash with many pointing out on social media platforms that as a charity, Christian Aid enjoys its own tax arrangements including Gift Aid, which has led the charity to issue a further statement to clarify its position.

Melua is reported to have put £59,500 into the Liberty scheme, which The Times said would allow her to create "losses" of £850,000 to shelter her other income. Involvement in "aggressive" tax avoidance schemes has already led to criticism of other stars, including Take That's Gary Barlow. He faces a hefty tax bill for his involvement in another scheme, Icebreaker, which was styled as a music industry investment scheme, but was successfully challenged in court in May.

Liberty faces a similar challenge, scheduled for next year.

When details of the Icebreaker challenge emerged, Prime Minister David Cameron said the scheme "wrong" and that "it is right that they are going to have to pay back the money".