Property tycoon Jamie Ritblat and EY settle tax dispute with HMRC

Property tycoon Jamie Ritblat and Big Four accountancy firm EY have agreed a settlement with the UK’s tax authority over tens of millions of pounds that HM Revenue & Customs claimed it was owed.

HMRC was pursuing the Conservative donor and his real estate investment firm Delancey for income and employment-related taxes on £141mn of profits from the group’s flagship fund that was paid from a trust to 24 employees, including Ritblat.

The UK’s tax authority then also sued EY over alleged misrepresentations made during the negotiation of a settlement in which HMRC accepted just £400 in 2015, barring the agency from collecting further taxes from the trust’s beneficiaries or Delancey.

Ritblat and Delancey asked the High Court to hold HMRC to the 2015 deal, which would leave the £141mn in effect untaxed apart from the £400 settlement payment. HMRC sought to tear up the agreement and go after EY for its role in advising on the settlement.

The settlement between one of the UK’s best-known property investors — whose portfolio spans several of London’s biggest regeneration projects, including the Earl’s Court redevelopment and the former Olympic Athletes’ Village — EY and HMRC brings to an end one of the UK’s most high-profile and complex tax litigations.

The legal settlement was confirmed by all parties on Friday. Terms of the agreement were not disclosed.

HMRC said: “This is a good result for the UK taxpayer. We have secured a significant settlement sum for the public purse, in respect of the disputes. This reflects the outcome we would have reasonably expected to achieve if successful at court, without the time and cost of further litigation.”

The Ritblat dispute centred on an employee benefit trust set up in 2007 as he raised €1.5bn for Delancey’s flagship DV4 Limited client fund.

The DV4 Trust is an employee benefit trust and held the Delancey employee profits, also known as carried interest, from the DV4 Limited investment fund.

In the tax years 2015-16 to 2018-19, the trust made distributions to Delancey employees totalling £141mn, of which £63mn went to Ritblat personally, according to HMRC.

The lengthy dispute saw Ritblat sue HMRC in the High Court. The tax authority brought a High Court lawsuit against Delancey. There were proceedings in the tax tribunal relating to Ritblat’s personal tax returns. Then, HMRC sued EY.

The lawsuit against EY was regarded by tax experts as highly unusual as the UK government rarely targets major tax advisers in addition to its wealthy clients.

Delancey said: “We are disappointed it was necessary to initiate legal proceedings against HMRC to achieve this. However, we are pleased that ultimately all parties were able to find a compromise to resolve the matter.”

EY said: “We can confirm that EY has reached a settlement agreement with HMRC in relation to this matter. The terms of the settlement are confidential.”

The Big Four firm previously said that it “strongly refute[d] any suggestion of wrongdoing” and would “vigorously defend” the claim against it.