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‘Nothing was illegal’: British lingerie tycoon defends boyfriend over alleged link to tax avoidance

  • Entrepreneur Michelle Mone defended boyfriend and business partner Doug Barrowman over alleged ties to tax avoidance
  • Barrowman has served as director of offshore payroll firm Aston Management Ltd (AML)
  • Hundreds of workers could be at risk, according to the U.K's Mirror newspaper

British entrepreneur and parliamentarian Michelle Mone has defended her billionaire boyfriend over his links to an alleged £13 million ($16.9 million) tax avoidance scheme.

Doug Barrowman had previously served as director of an offshore payroll company called Aston Management Ltd (AML). AML is said to have helped its workers reduce their tax bills to less than 10 percent.

"They're not going after my partner, and it was a scheme that was set up – and I'm not here to speak on his behalf, it's not my business – but it was a scheme that was set up way back in 2011," Mone told CNBC Wednesday.

"And when legislation changed, they stopped doing it. So nothing was illegal, nothing was untowards, and he hasn't done a thing wrong."

Her Majesty's Revenue and Customs (HMRC), the U.K. governmental department tasked with collecting taxes, has asked contractors who benefited from the scheme to pay back tens of thousands in income tax.

AML allowed its clients to sign up to Employee Benefit Trusts (EBTs), funds which can be set up overseas by firms to hold assets on behalf of their employees. These clients effectively became members of staff under the scheme.

The firm paid EBT benefits into the U.K. accounts of staff, on which they paid little or no tax, according to the U.K's Mirror newspaper. And now hundreds of workers could be at risk of bankruptcy with the HMRC demanding the cash, according to the report.

AML 'fully compliant with UK law'

A spokesman for Barrowman said in statement that the structures in place for contractors were "fully compliant with U.K. law."

Baroness Mone arrives in the House of Lords before the State Opening Of Parliament at Houses of Parliament on June 21, 2017 in London, England.
Stefan Rousseau | WPA Pool | Getty Images
Baroness Mone arrives in the House of Lords before the State Opening Of Parliament at Houses of Parliament on June 21, 2017 in London, England.

"AML established structures for hard-working contractors and not millionaire celebrities or high net-worth individuals which was fully compliant with U.K. law. When the legislation changed in 2011 these structures subsequently ceased," the spokesman told CNBC in an email.

"HMRC unfairly issued APNs (accelerated payment notices) in a bid to retrospectively punish our clients and it was decided that this decision would be challenged at a judicial review."

The spokesman added: "Other companies have chosen to turn their backs on clients who offered such structures but we decided to invest hundreds of thousands of pounds financing legal action to defend the rights of individuals from unwarranted and unjust HMRC demands and will continue to do so, in this respect the judgement is being appealed."

EBTs were considered legal at the time

Barrowman's boyfriend and business partner Mone is a lawmaker in the U.K.'s upper chamber of parliament, the House of Lords, and was appointed by former Prime Minister David Cameron in 2015.

She told CNBC that the rules on such funds had been changed by HMRC in 2011, and were considered legal at the time.

"Before I entered the House of Lords, I had an EBT (Electronic Benefits Transfer) that my ex-husband set up in the business. And you've got to look back and think, if you've got companies, then you're going to look for the best way for your people, for your employees, and that's what we were advised," she said.

Mone added: "Now, that's all changed now, and that's all been stopped, but I wouldn't sit here and say he's done anything illegal, anything but. He is an amazing guy, very charitable, and a very successful business guy."

Michelle Mone
Eamonn McCormack | WireImage | Getty Images
Michelle Mone

Barrowman is the owner of the Knox Group of companies, and on Wednesday launched a real estate development in Dubai jointly with Mone, touted to be the first to be priced in bitcoin. AML is still part of Barrowman's Knox Group.

A spokesman for HMRC said that, although it couldn't comment on individual cases, it has "robust compliance procedures" in place to identify tax avoidance.

"Like most other avoidance schemes Employment Benefit Trust schemes simply do not work. HMRC always challenges tax avoidance on behalf of the majority of people who play by the rules," the spokesman said.

"HMRC has robust compliance procedures to identify and take targeted action against any identified attempt to avoid tax."

The department said that people facing payment problems due to potential tax avoidance are advised to get in touch.

"Anyone who anticipates problems meeting their tax obligations should contact HMRC, who may be able to offer extra time to pay based on an evaluation of individual circumstances. The department has an outstanding track record for supporting those with genuine problems," the spokesman added.