Paradise Papers -
The Shadowy World of Big Money

The High-Flyer

Racecar driver Lewis Hamilton has long been a global brand – and played the part. Whether it's his jet, motorhome, employment contract or marketing rights, little happens without offshore help.

By Elisabeth Gamperl and Mauritius Much - 07. November 2017

It was still dark outside when a red jet touched down at the Isle of Man’s small airport on a rainy Monday morning at 6:40 a.m. It was Jan. 21, 2013, and the sun wouldn’t rise over this island between Britain and Ireland for another two hours. The sleek aircraft bore the registration G-LCDH, with the “G” standing for Great Britain and the other letters being the initials of Lewis Carl Davidson Hamilton, a British Formula One star who was, in fact, on board the Bombardier Challenger 605 on that cold and wet morning. Hamilton, who had turned 28 two weeks before, had recently purchased the jet in Canada. He was sharing the pleasure of flying in a private plane with his then-girlfriend, American pop singer Nicole Scherzinger.

Hamilton and Scherzinger were a real glamour couple, a pair who felt as comfortable on the red carpets of Monaco, Paris and Rome as they did in London or Los Angeles. But at the Isle of Man Airport in Ronaldsway? In the middle of nowhere in the Irish Sea?

The Formula One driver could have certainly found the lack of a speed limit on the island’s non-city roads appealing, but he had made the journey for another reason. His motivation was money – a lot of it. Thanks to a complex network of offshore companies and an itinerary that routed him through the tiny, damp island, Hamilton was able to get around paying 20 percent in value-added tax (VAT) for importing his Canada-bought plane into the European Union. The jet had cost him the equivalent of 20.3 million euros, so the VAT would have added up to a cool 4.06 million euros.

Lewis Hamilton, now 32, recently clinched his fourth Formula One World Championship title with two races left in the season. He’s the poster boy of the racing scene, with both the looks and the style. A casual outfit suits him just as well as an elegant one and he seldom goes anywhere without his sunglasses. For five years, a cherry red jet with black and red leather seats has also been part of his unmistakable lifestyle. “Damn I love this plane,” he wrote on Instagram back in September 2014.

And damn, how much the multimillionaire must love the Isle of Man. The island isn’t officially part of the EU, but it does have a customs agreement with member state Britain. According to that deal, registering an airplane on the Isle of Man is effectively the same as importing it into the EU, except that it gets taxed locally – i.e. not at all.

Island hopping in an airplane is a great way to avoid taxes

On the Isle of Man, registering airplanes has become a business model in and of itself. Ten years ago, the island – with its population of 83,000 and an area smaller than Hamburg, Germany's second-largest city – set up a registry for small corporate jets. Since then almost 1,000 jets have been registered.

The Isle of Man’s tiny airport is normally a hub for fishermen, mountain bikers and hikers. The island markets itself as a mecca for outdoorsy types, for whom the airport maintains a small but cozy terminal. The special guests who landed on Jan. 21, 2013, however, weren’t there on vacation. They had come to import their aircraft into the EU, which is why a customs employee had to show up for work outside of normal business hours, a service that costs 60 pounds extra. At 7:30 a.m., according to documents in the Paradise Papers, an employee of the law firm Appleby sent a message with his BlackBerry phone that read, “Customs form delivered to aircraft. Clear to go.” About an hour after landing, the red Bombardier Challenger took off again and flew to Stuttgart, the home of Mercedes, which had just become Hamilton’s new employer.

Fast, simple, discreet: The documents in the Paradise Papers show that with the help of the law firm Appleby, planes worth at least 1.47 billion euros have been imported into the EU through the Isle of Man, most of them likely with the aim of minimizing taxes.

Hamilton also likes to save where he can. The Paradise Papers reveal that not only his jet, but also many other areas of his life are handled through offshore companies. His employment contract with Mercedes goes through one such company, as do photo royalties and revenues earned through advertising. A third shell company is used as a holding firm for his motorhome, a behemoth of a recreational vehicle in which Hamilton lives during Grand Prix weekends in Europe. He also managed to acquire that vehicle VAT-free.

Hamilton’s offshore empire may be small, but it’s effective. And it’s organized at least in part by the law firm Appleby, which since Sunday has been at the center of the Paradise Papers revelations. It takes a certain level of wealth, but those who are rich enough can save millions by avoiding a tax that most ordinary people have no choice but to pay. Whether it’s for diapers or ice cream, a new car or a loaf of bread, there’s no avoiding VAT. Technically, the same rules apply for jets, boats and motorhomes – if only there weren’t so many loopholes like the one on the Isle of Man.

A layover at Ronaldsway’s diminutive airport is only the final stage of a multifaceted tax trick. For Hamilton to be able to save on import VAT, he must use a prearranged nexus of offshore companies of which he is the beneficiary. One of these firms must be registered on the Isle of Man. In Hamilton’s case, that would be the aptly named Stealth (IOM) Limited, an offshore company founded by Appleby.

In order for the authorities on the Isle of Man to agree to forego VAT on Hamilton’s jet, they must be given the impression that the aircraft is being used for regular leasing purposes. 

First, a company on the Isle of Man is required. Hamilton’s is called Stealth (IOM) Limited. It leases the plane from another offshore company.

The company on the Isle of Man leases the jet to an aviation operator which provides, for example, the pilots and crew. The operator is not owned by Hamilton.    

The company on the Isle of Man leases the jet to an aviation operator which provides, for example, the pilots and crew. The operator is not owned by Hamilton.    

Lewis Hamilton then charters the jet himself or has another one of his offshore companies do it.

The Isle of Man’s customs office stated that 262 such companies were currently registered on the island for leasing purposes. Of those, 231 had been exempted entirely from VAT between 2011 and 2017. That would mean overall, the companies’ owners managed to save the equivalent of 900 million euros. Put differently, the trick with the airplanes in the Irish Sea may have cost various EU governments a nine-digit sum.

Taking the jet to the Greek island of Mykonos

Some tax experts take issue with the fact that Hamilton’s firm on the Isle of Man is a classic offshore company with no office or staff and is registered at the same address as Appleby. Hamilton’s lawyers, on the other hand, contend that it’s not an offshore company at all and that its aircraft leasing operations are a common and normal practice.

But there are two more problems with Hamilton’s airplane arrangements. Even according to the Isle of Man’s rather generous regulations, the jet still needs to be rented to other customers besides the Formula One pilot. Plus, in order to be completely tax-free, the jet can only be used for business travel – in Hamilton’s case, to charter him to the next Grand Prix race, for example, or to Stuttgart, where Mercedes is headquartered, or to Brackley, England, the hometown of his Formula One team.

However, there’s no record of anyone else chartering Hamilton’s plane, at least not in the Paradise Papers. Hamilton’s lawyers have remained mum on the subject. They also admit Hamilton uses his jet for private travel such as vacations. In mid-July 2017, for instance, he and his entourage flew to the Greek island Mykonos for two days, while other Formula One drivers attended an official fan festival in London and sped a few times around Trafalgar Square.

Lewis Hamilton saved a total of 4.06 million euros in VAT on the plane’s purchase price.

Leasing contracts show that Hamilton uses his jet privately for 80 hours a month and that one of his companies rents it for another 160 hours a month. Leasing rates for private use of the jet should be taxed.

Leasing contracts show that Hamilton uses his jet privately for 80 hours a month and that one of his companies rents it for another 160 hours a month. Leasing rates for private use of the jet should be taxed.

If one assumes that Hamilton uses the plane one-third of the time for personal travel and two-thirds of the time for business trips, then he should have still declared at least one-third, or 1.35 million euros, of the 4.06 million euros he saved on VAT.

Lewis Hamilton’s leasing contracts show that he uses his plane himself for 80 hours a month and that one of his companies rents it for another 160 hours. Based on that, if one assumes that Hamilton uses the aircraft one-third of the time for personal travel and two-thirds of the time for business trips, he should still have to declare at least one-third – or 1.35 million euros – of the 4.06 million euros he didn’t pay in VAT. In addition, the leasing rates for private use of the jet should have also been taxed.

“If there was private use, this is evasion,” said Rita de la Feria, a tax law professor at the University of Leeds. “Lewis Hamilton should have paid VAT on any private flights.” She added that Hamilton could be held personally liable.

De la Feria was asked to analyze the Hamilton case by the British newspaper The Guardian, one of the Süddeutsche Zeitung’s journalistic partners in the Paradise Papers investigation. The tax expert said she found the pretense of operating a completely normal aircraft leasing scheme very dubious. “This jet is being rented out to only one person. The scheme is completely artificial,” she said. Indeed, Hamilton’s jet is primarily reserved for him and its use is customized to fit his schedule and his schedule alone. To use the plane he needs a pilot and a crew, which are leased for every flight. Hamilton’s lawyers, however, claim the leasing structure is legal and represents neither tax avoidance nor misfeasance. They even contest that importing the jet via the Isle of Man provided their client with any tax advantages.

The law firm Appleby typically sets up offshore constructs like Hamilton’s with the help of Ernst & Young. In Douglas, the Isle of Man’s capital, the consulting firm's local office is just over 300 meters from Appleby’s. Take a right, walk up the hill and it’s the gray building on the corner with the Ernst & Young logo discreetly visible on a single window. The firm said in response to a request for comment by the Süddeutsche Zeitung that such leasing arrangements were completely legitimate, accepted and commercial practice.

Nonetheless, in late October, the Isle of Man government invited Britain's HM Treasury to take a closer look and issue a report by the end of 2018. And the local customs office, which must sign off on every jet leasing arrangement, began reviewing the deals a year ago. The authority said its review had already identified many improperly calculated VAT waivers.

It’s not very far from the customs building to Appleby’s offices, either – down the hill 250 meters to the old train station. The only trains that pass behind the brick building are old steam locomotives with cars full of tourists. A sign on the adjacent building reads, “Customs and VAT Enquiries.”

In Douglas, most places are never more than a short walk away. The Paradise Papers reveal that a constellation of offshore companies similar to the one used for Hamilton’s jet was also set up for his motorhome. His rig often has multiple functions while the Formula One driver is busy hopping from one European race to the next; it can serve as a living space, meeting room and doctor’s office. The motorhome was made by a German manufacturer, and when Hamilton bought it in 2015, a company and a leasing model was set up on the Isle of Man. The setup was totally legal, Hamilton’s lawyers say, since the roomy vehicle is solely used for commercial purposes. It was apparently delivered to Hamilton just in time for the 2015 Belgian Grand Prix in the town of Spa. The net price (excluding VAT) was 1.77 million euros.

Malta, Guernsey and the Isle of Man aren’t exactly destinations one would immediately associate with Lewis Hamilton

The offshore company BRV Limited played a central role in the tax trick with the jet and in procuring the motorhome. The firm, owned by Hamilton, is located on the Bailiwick of Guernsey, which enjoys the same largely autonomous status as Jersey. The company leases his motorhome and often his plane, too. But Hamilton and his advisers use the company for other business as well. The Formula One driver’s contract with Mercedes goes through BRV Limited, for instance – according to an exchange of emails that can be found in the Paradise Papers. The contract, which was signed in 2015 and runs until the end of 2018, foresees an annual salary for Hamilton of around $50 million a year, according to the British newspaper The Telegraph.

Hamilton has yet another offshore company for his income from advertising and sponsoring deals. This firm is located in the tax haven of Malta and is called 44IP Limited. Forty-four is Hamilton’s Formula One number and has long been part of his marketing identity. He kept the No. 44 even though as world champion he has a right to No. 1. But a number change could have been bad for business – for the brand that is Lewis Hamilton. The racecar driver is doing quite well on that front: According to the business magazine Forbes, Hamilton earned around 6.7 million euros in 2017 from ad revenues with companies like Hugo Boss, the cosmetics giant L'Oréal and the German sports outfitter Puma. Like every other company in Malta that’s owned by foreigners, 44IP Limited is subject to a corporate tax rate of just 5 percent.

Malta, Guernsey, the Isle of Man: Most Formula One fans wouldn’t associate such shadowy corners of the world of international finance with Lewis Hamilton. The international celebrity tends to curate his image in the flurry of camera flashes with the number 44, his signature sunglasses, his (by now) world-famous bulldogs Coco and Roscoe, red carpets and his red jet. In one photo that Hamilton posted on Instagram, he can be seen standing on the tarmac with his hands in his sweatshirt pockets and a backwards-turned baseball cap. The caption reads, “Just a kid from the UK that had a dream.” Hashtag #MegaJet.


But most kids would never dream of skirting as much in taxes as Hamilton has. Most kids have no choice but to pay the requisite 20 percent VAT, whether they’re buying a ticket for a Formula One race, shoes from Hamilton’s sponsor Puma or a can of his limited edition Monster energy drink – emblazoned, of course, with the No. 44.

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