Cheryl faces big tax avoidance bill after losing long-running battle with HMRC over firm she set up at peak of her solo career
- Former Girls Aloud singer Cheryl Tweedy lost a long-standing test case against HM Revenue and Customs
- Judge found her personal firm culpable of ‘straightforward profit extraction’ with ‘tax avoidance scheme’
- Artificial employee bonus scheme meant her company paid capital gains tax instead of income tax and NI
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Cheryl Tweedy faces a demand to pay back cash to the Government after her firm used a ‘tax avoidance scheme’ – meaning she could make more money by paying capital gains tax, instead of income tax and national insurance.
The former Girls Aloud singer lost a long-standing test case against the taxman after a judge found her personal firm CC Entertainments culpable of ‘straightforward profit extraction’ with an artificial employee bonus scheme.
Tweedy started using the scheme at the pinnacle of her solo career under her married name Cheryl Cole, which meant the firm paid capital gains tax instead of income tax and national insurance, which carry higher rates.
HM Revenue and Customs can now demand the singer pay for historical tax, including compound interest. The amount is not known but she will not be fined. The company registered profits of just £120,000 in 2020.
A spokesman for Miss Tweedy – who had five solo number one singles at the height of her success, which was a record for a British female artist – said he could not comment as the matter is part of an ongoing legal case.
HMRC tried to make CC Entertainments – based in Chelsea, West London – the lead case in a court action that came to light in 2019. But the tribunal chose another firm, Britannia Hotels, after 38-year-old Tweedy asked not to be the lead case. It meant fewer details about her alleged financial irregularity were made public.
Cheryl Tweedy, pictured in 2012, faces a demand to pay up after her firm used a ‘tax avoidance scheme’
Cheryl Tweedy made her name in the pop group Girls Aloud – pictured in March 2005 (right) along with (from left) the late Sarah Haring, Nadine Coyle, Kimberley Walsh and Nicola Roberts. There is no suggestion of any wrongdoing by the others
Judge Jennifer Dean noted: ‘The appeal of CC Entertainments is a straightforward ‘profit extraction’ case where the single 100 per cent shareholder [Tweedy] signed a contract of employment and was awarded a Growth Securities Ownership Plan said to qualify as an employment-related security.’
Judge Dean ruled in favour of the taxman on January 20, meaning HMRC can now demand the singer pay historical tax, including compound interest. She will not be fined or asked to pay penalties.
Responding to the ruling, a HMRC spokesman said: ‘We welcome this ruling which confirms these were tax avoidance schemes. We are committed to ensuring that everyone pays the right tax at the right time to help fund our vital public services.’
The taxman has recovered at least £128million in unpaid taxes from some of the 56 firms – but tax officials said that ‘confidentiality’ prevented them from revealing which companies had paid.
Tweedy’s occupation was listed as ‘entertainer’ at Companies House in her role as a director of CC Entertainments
HMRC can demand the singer pay for historical tax, including compound interest. The amount is not known (stock image)
Grant Thornton, the accountancy firm which marketed the bonus scheme used by Tweedy, refused to comment on the ruling yesterday.
But it previously told The Times: ‘The growth securities ownership plan was developed to help our clients link their employees’ contribution to the performance of their businesses and are not free of tax.
‘In common with other incentive plans, if there is growth in value in the share or security that is issued to the holder of those shares/securities, then that increase in value is correctly taxed as a capital gain.
‘It’s a common approach…We have been open and transparent about this plan from the outset, including the HMRC’.