Roman Abramovich could owe UK £1bn over tax dodge that helped bankroll Chelsea FC

According to evidence obtained by the British Broadcasting Corporation (BBC), sanctioned Russian oligarch Roman Abramovich may owe the UK up to £1 billion in taxes due to a failed attempt to avoid taxes on hedge fund investments. Leaked documents reveal that investments worth $6 billion (approximately £4.7 billion) were routed through companies in the British Virgin Islands (BVI). However, evidence suggests that these investments were actually managed in the UK and should therefore have been taxed there.

The BBC and The Bureau of Investigative Journalism (TBIJ) also discovered that during Abramovich’s ownership of Chelsea Football Club, some of the funds could be traced back to companies involved in this scheme. Abramovich's lawyers stated that he "always obtained independent professional tax and legal advice" and "acted in accordance with that advice." Abramovich denies any knowledge or personal responsibility for any unpaid taxes and is reportedly currently dividing his time between Istanbul, Tel Aviv, and Sochi, Russia.

Labour MP and head of the Fair Tax Parliamentary Group, Joe Powell, has called for an "urgent" investigation by HM Revenue & Customs (HMRC) to recover what could be "very significant sums of money that could have been used for public services." The key figure in the scheme is Eugene Shvidler, a former director of Chelsea Football Club and a billionaire businessman, who is currently challenging the UK government's decision to sanction him due to his close ties with Abramovich.

Shvidler moved to the US after Russia's invasion of Ukraine, but between 2004 and 2022, he was a resident in the UK, owning properties in London and Surrey. A tax expert told the BBC that evidence suggests Shvidler made strategic decisions regarding the investments in the UK rather than the British Virgin Islands, which is "pretty strong, compelling evidence" that these companies should have paid UK tax. Shvidler's lawyers stated that the BBC’s reporting was based on "incomplete and confidential business documents" and made "strong and erroneous conclusions about Mr. Shvidler's actions."

They stated that the "investment structures" were "the subject of very careful and detailed tax planning, undertaken and advised on by top tier tax advisors." The scheme involving Abramovich’s hedge fund investments was revealed in a massive data leak that the BBC and The Bureau of Investigative Journalism have been reviewing for over a year, from a Cypriot company that manages Abramovich's global empire. Since 2023, the BBC and its media partners, including The Guardian, have been reporting on the leaked documents as part of the International Consortium of Investigative Journalists’ (ICIJ) "Cyprus Confidential" investigation. On Tuesday, we revealed how Abramovich avoided millions of dollars in VAT on yacht operating costs.

The leaked data reveals how Abramovich channeled a vast fortune he made in the 1990s through corrupt deals into a British Virgin Islands company called Keygrove Holdings Ltd. According to the leaked documents, a network of BVI companies owned by Keygrove invested up to $6 billion (approximately £4.8 billion) in Western hedge funds between the late 1990s and the early 2020s. These investments generated approximately $3.8 billion (approximately £3.1 billion) in profits for the oligarch over nearly two decades. By investing through companies in the British Virgin Islands, a region that does not tax corporate profits, the scheme appears to have been set up to ensure as little tax as possible was paid.

It is not uncommon for businesses to legally avoid paying tax on profits by investing through companies in tax havens. However, the companies involved must be managed and controlled in the place where they are registered. If the strategic decisions for an offshore company are made by people based in the UK, its profits can be deemed to be taxable as a UK company. The leaked documents show how directors of the British Virgin Islands investment companies granted full power over these companies to Shvidler, who was based in the UK and obtained British citizenship in 2010.

The BBC has seen documents from between 2004 and 2008 that granted him “the widest powers” and “full discretion to deal with all matters” of the British Virgin Islands investment companies. From 2008, Shvidler appears to have gained the power to direct Keygrove's investments through another company, which owned the BVI companies. Millennium Capital Ventures Ltd, indirectly owned by Shvidler's wife and where he was appointed a director in 2000, became Keygrove’s investment manager. It was given "full power to supervise and direct" the investment of assets, "all without the need for prior consultation with the client."

Further evidence of Shvidler's key role in the investment decisions of the BVI companies appears in a lawsuit brought by the US Securities and Exchange Commission (SEC) in September 2023 against a New York firm called Concord Management. The SEC documents state that Concord had only one client, which was later identified as Abramovich. The firm advised the oligarch's British Virgin Islands companies on investment decisions. It identified one of Abramovich's "longstanding close associates," referred to as "Mr. B," who made "investment decisions" for Abramovich.

The documents state that he was "the point of contact to receive investment recommendations" and "to decide or communicate decisions on whether to make a recommended trade." Through the leaked documents, the BBC was able to confirm that "Mr. B" is Eugene Shvidler. The evidence suggests that Shvidler was making the decisions described by the SEC, managing and controlling Abramovich's investments, from the UK rather than the British Virgin Islands. Tax expert Rita de la Feria told the BBC that the evidence that a UK resident like Shvidler was making “strategically significant decisions” about the hedge fund investments “strongly indicates” that the huge profits should have been taxed in the UK.

She said: “I think this is pretty strong, compelling evidence. This is further strong evidence that the effective management of the company was not happening in the British Virgin Islands.” Shvidler's lawyers stated that “Mr. Shvidler could not possibly have been knowingly or negligently involved in an unlawful tax avoidance scheme.” Abramovich’s lawyers stated that, in addition to the advice he received on tax matters, he “expected that the people in charge of companies associated with him also sought similar advice.” The leaked documents also reveal how a large amount of untaxed profits from Abramovich’s hedge fund investments eventually flowed into Chelsea Football Club through the oligarch's network of companies.

The hedge fund investments flowed back into his companies in the British Virgin Islands and then into their parent company, Keygrove. Keygrove then lent the funds to other companies in Abramovich’s network, which in turn lent the funds to Camberley International Investments Ltd, which was set up to fund Chelsea Football Club. By 2021, when Chelsea won the Champions League, the Club World Cup, and the European Super Cup, hundreds of millions of dollars in loans to the club could be traced back to companies that benefited from Abramovich's untaxed hedge fund investments.

How much could Abramovich or the associated companies owe if HMRC investigates? We have assessed the profits made by the British Virgin Islands investment companies between 1999 and 2018. The leaked documents only contain full accounts for the companies investing in hedge funds from 2013 to 2018. However, we can estimate the amount the associated companies may have made across the entire period by looking at their “revenue reserves.” These are profits that are retained within the business rather than paid out to shareholders. By the end of 2018, this figure stood at $3.8 billion.

Applying historic UK corporation tax and currency exchange rates to the revenue reserves prior to 2012 and the annual profits up to 2018, the potential tax bill is over £500 million. However, if the unpaid taxes are investigated, HMRC can also impose late payment charges and penalties for not informing the authorities. Depending on the outcome of the investigation, and whether those liable were aware but did not inform HMRC, or whether they were unaware, the total amount owed could be between nearly £700 million and over £1 billion.

It is possible that some of the tax on profits may not be recoverable as HMRC investigations can only go back 20 years at most. However, our calculations may also be an underestimate, as we have applied the lowest corporation tax rates that existed between 1999 and 2012, and it is possible that profits were taken out of the companies during this period that we have not included in the total. Either way, Abramovich's tax bill could exceed the £653 million fine imposed on Formula One boss Bernie Ecclestone in 2023.

Following Russia's full-scale invasion of Ukraine, the UK government allowed Roman Abramovich to sell Chelsea Football Club to Todd Boehly. This was on the condition that the £2.5 billion proceeds would be donated to a charity supporting victims of the war in Ukraine. Nearly three years later, the money remains in a frozen Barclays bank account, reportedly due to disagreements over how the money should be used, with Abramovich wanting the money to go to "all victims" of the war, while the UK government insists it should only be used for humanitarian aid in Ukraine.

The BBC’s investigation suggests that just as Ukrainians are waiting for the former Chelsea owner’s funds, so too are UK taxpayers. "Cyprus Confidential" is an international collaborative investigation launched by the International Consortium of Investigative Journalists (ICIJ) in 2023 to investigate the corporate and financial services provided by Cypriot companies to associates of Russian President Vladimir Putin's regime. Media partners include The Guardian, investigative newsroom Paper Trail Media, Italian newspaper L'Espresso, the Organized Crime and Corruption Reporting Project (OCCRP), and The Bureau of Investigative Journalism (TBIJ). TBIJ reporting team: Simon Lock and Eleanor Rose.