In Eoghan Flanagan Christopher David Moyles Allan Stennett v HMRC [2014] TC03314 three taxpayers, who included former BBC Radio One DJ Chris Moyles were unsucessful in claiming tax relief under a tax avoidance scheme in which they claimed to be car dealers. The First Tier Tax (FTT) tribunal found that there was no car trade and that the scheme did not work.

 The FTT examined the “Working Wheels” marketed tax scheme. 

  • The scheme sought to take advantage of the tax rules for manufactured overseas dividends in order to create a fee that would be deductible against trading income.
  • Funds passed in a complex but circular flow of transactions via different nominees, offshore companies and trustees.
  • The taxpayers had to have a trade in order to for the scheme to work and they claimed they were car dealers.
  • Their resultant trade loss from car dealing generated would then be available under sideways loss relief.
  • The losses claimed in this case were: Flanagan £5 million, Moyles, £1 million and Stennett £15 million.
  • A further 450 taxpayers had used the scheme and will rely on the decision.

The FTT found that the purpose of the scheme was to manufacture a tax loss much greater than any true economic loss at little or no financial risk to the user, whose exposure was limited to the cost of the promoters’ fees and some other minor expenses.

The car dealing trades made gross profits of just £100, yet after claiming tax relief on financing charges made losses of millions.

Judge Bishop, in dismissing the appeals said

“The taxpayers, “as though by magic”, should appear to have incurred vast fees as a condition of borrowing modest amounts of money they did not need in order to invest it in a “trade” they had no desire to pursue. The supposed fee for the loan bore no relation to the size of the loan, but was merely the amount of the artificial loss the user wished to generate and the “trade” was no more than a device, necessary if the scheme was to work... It was pre-ordained that the large “loan” would be repaid by nothing more than a series of bookkeeping entries...[and] the relevant statutory provisions, construed purposively, were not intended to apply to the transaction, viewed realistically.”


A flowchart was created for this case to illustrate the circular flow of funds: the scheme, not unlike the Eclipse 35 Film partnership scheme and many more was devised on a purely mechanical basis and had no commercial purpose other than to save tax. This is in contrast with the type of tax avoidance scheme which parliament invents and promotes such as EIS, EMI, SEIS and the varous capital allowances incentives over the years which seek to encourage investment in disavantaged areas of the UK.

Not an ideal scheme to have joined if you want to gain favour with other taxpayers at the moment: ex-DJ Moyles was willingly sold this "lemon". This is the second scheme that the ex-DJ appears to have participated in (maybe there are more) and his tax affairs hit the headlines in 2012 when applied to the FTT for anonymity, which was not given in respect of another scheme which also failed. 

Notable here in HMRC's fight to close down firms who are engaged in aggressive tax avoidance is the fact that this scheme was designed by NT Advisors, who have caused great shame on the UK’s Charity Commission which failed to notice that their British Virgin Islands registered charity, the Cup Trust had managed to claim £46 million under Gift Aid whilst giving a mere £55k to good causes yet allowing donors to avoid up to £55 million in income tax.

There is a comic spin off to this tale: the Sun newspaper has tried to sell "car dealer" DJ Moyles a second hand banger


Eoghan Flanagan Christopher David Moyles Allan Stennett v HMRC [2014] TC03314