Millionaire Monaco-based Matalan founder sues PwC over tax liability

John Hargreaves, founder of UK discount retailer Matalan, is suing PwC over claims the firm’s advice left him liable for as much as £135 million in tax. Hargreaves alleges that he placed “complete trust” in the advice the firm gave him when he moved to Monaco 20 years ago.

Matalan is a British budget fashion and homeware retailer based in Knowsley, Merseyside. Having been established in 1985 by John Hargreaves, the brand now has 200 stores in the UK, and employs over 16,000 people.

The Hargreaves family floated the company on the London Stock Exchange between 1998 and 2006, during which time John Hargreaves and his wife moved to Monaco. This alleged non-residence led Hargreaves to claim he was not liable to capital gains tax on a gain of £200 million arising on the disposal of Matalan shares during its time as a public company.

Hargreaves’ claim was resisted by Her Majesty's Revenue and Customs, and following years of litigation, he has been billed for £135 million, including interest to date. As a result, Hargreaves – whose net worth according to the 2019 Sunday Times Rich List is estimated at £600 million – has opted to sue accounting and consulting giant PwC for damages.

The case, which was originally filed in 2012, centres upon Hargreaves citing his being liable for taxation as a ‘loss’, which PwC failed to advise him against. When selling part of his shareholding in Matalan in 2000 – the net proceeds of which amounted to £237 million – he intended to do so as a non-resident, something his legal team insists PwC actively encouraged him to do so.

However, while Hargreaves decided to permanently move to Monaco and to become a non-resident in relation to his taxable status in the UK with effect from April 2000 onwards, several years later his status was thrown into question. HM Revenue & Customs decided the steps he had taken were not sufficient, and that he was still a taxable UK resident.

As Hargreaves’s lawyers submitted a new court filing in May 2020, he again suggested that PwC did not fulfil their duties to ensure UK revenue officials would accept his bid to take non-resident status and avoid most taxes in the country. The London lawsuit added that Hargreaves had “placed his complete trust and faith” in PwC as his tax advisers at the time.

If HMRC’s assessment of what Hargreaves owes in tax is correct, his ‘loss’ in relation to that tax year will be around £135 million including interest – while he would retain £102 million from his original share sale, plus interest. As reported by the Financial Times and Bloomberg news, PwC is seeking to throw out aspects of the case, and said in a statement that it believes the lawsuit will ultimately fail.

The story has much in common with Lady Nina Bracewell-Smith, who sued Deloitte and Linklaters in 2018, in relation to a similar tax gambit. While the sale of her 15.9% stake in the Premier League footballing institution to majority owner Stan Kroenke therefore constituted a total profit, Bracewell-Smith was left furious that she was expected to pay tax on the loan notes used to purchase her share of the club. Bracewell-Smith described this taxation as a £10 million ‘loss’, and further sued for more than £1 million in damages, incurred by her  £1,249,815 move to the city-state tax-haven of Monaco to avoid additional taxation.