Advantage HMRC in Matalan founder’s long-running tax dispute

John Hargreaves, founder of out-of-town discount retailer Matalan, could face a tax bill of up to £135m in a long-running court battle with the taxman.

The multimillionaire son of a Liverpool docker still has one final opportunity to challenge the ruling by the Upper Tier Tribunal – the highest court that oversees tax cases – but must lodge his case with the Court of Appeal by next Friday, March 4.

Hargreaves has been in dispute over the tax demand for almost 20 years.

But the latest ruling regarding capital gains tax linked to his disposal of £231m of Matalan shares in 2000 means he could be liable to pay up to £135m, including interest, although a final figure has not yet been revealed.

Hargreaves launched Knowsley-based Matalan as a Liverpool market stall in 1985.

He moved to the tax haven of Monaco in March 2000, two years after he floated the company on the London stock exchange. He sold £231m of shares in May, 2000.

He took the company private again in 2006.

The court ruling said: “Part of Mr Hargreaves’ object in moving to Monaco was to ensure that he was no longer resident in the UK for tax purposes so that he could dispose of shares without becoming liable to capital gains tax.”

Court documents reveal he did not fill out the capital gains pages in his tax return because he did not consider himself a UK resident.

However, he was still working in Liverpool three days a week as Matalan executive chairman, as well as maintaining a UK property.

The Inland Revenue launched a probe into his tax affairs in 2004, but missed a deadline to begin an investigation before December 31, 2003.

HMRC then launched discussions with Hargreaves and his advisers, in which they told him to pay capital gains tax of £80m and income tax worth £4m in January 2007.

However, Hargreaves argued he was not a UK tax resident when he sold the shares and said the tax bill was not valid because HMRC missed its deadline to investigate.

In 2019 a judge ruled in Hargreaves’ favour, saying the case was too old for HMRC to make a claim, although he did allow an appeal.

In May, 2020, Hargreaves began legal action against his accountants, PwC, for allegedly giving him ineffective tax avoidance advice.

PwC argued its advice was sound and the case was too old to be brought.

Mr Hargreaves’ team of advisers is said to be “actively” considering an appeal.