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By: Simon Danaher

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November 10th, 2015

Investing and the premier league footballers facing ruin

Investment

[Estimated time to read: 3.5 minutes]

They think it's all over. It is now.

It was revealed last weekend that more than 100 footballers, many of them former premier league players, face losing up to £100m, after investing in film and property funds.

According to The Sunday Times, the former players – including the likes of Rio Ferdinand, Kevin Campbell and Martin Keown – lost out when their investments either tanked or they were hit by large tax bills from HM Revenue & Customs after the schemes were deemed to be avoidance vehicles.

The film schemes used by the footballers had originally been designed to encourage investment in the UK film industry by offering large tax rebates to those who invested.

However, in recent years, HMRC has decided many of the schemes are simply aggressive tax avoidance vehicles and have been hunting down those who use them and handing them large tax bills.

In fact, this latest tranche of footballers join a long and star-studded list of those caught up in tax avoidance schemes in recent years. The Beckhams, Bob Geldof, Andrew Lloyd-Webber and a few members of Take That have also faced financial loss and, in some cases, public shaming, because of involvement in the schemes.

There are three words which always spring to mind when these stories come to light: greed, credibility and prudence (or simple common sense!).

Greed

These investments are nearly always marketed with the explicit intention of appealing to the greedier side of human nature. 

While I’m sure, as Mr Lloyd-Webber claims, some of the investors hoped to support movie making in the UK, the primary reason for investing in these schemes is the opportunity to get a “guaranteed” cheque from the taxman.
Imagine that, a nice fat cheque from the taxman which can then be ploughed into that villa complex in Spain – with no real investment risk.

If it sounds too good to be true…

When investing, it is crucial not to be led by greed. All emotions cloud judgment, but this can be one of the most dangerous of all.

Credibility

In this most recent case, it seems the footballers had all been individually advised over many years by two financial advisers promoting the film schemes. 

However, it’s also very common in this type of scenario for those who are persuaded to invest to also begin promoting the fund, particularly if they have any fame.

What also then happens – and looks likely to have happened here – is for a “herd mentality” to have set in. Even if Rio Ferdinand didn’t tell someone he invested in it and that “they should too”, the fact he had, possibly influenced someone else part with their cash, simply because of his fame, not because of anything he said or did.

When choosing an investment it is crucial not to simply base your decision on what someone you are close to or trust (or who’s famous) has done too. Be critical, questioning – even cynical – it could stop you losing a fortune. Take advice from a credible source and question whether even a famous footballer might himself have been unwisely persuaded into falling foul of the ins and outs of UK tax law…

Prudence

Many of the footballers who have lost money in this scheme will be able to afford it. They’ll suck it up, put it down to experience and move on, ego slightly bruised.

But not all of them. According to The Times, some of the investors face bankruptcy.

It is a horrible way for them to learn this lesson – and you should take note – if you can’t afford to lose it, then don’t invest it. Be prudent – apply common sense! Think “if this investment falls, can I afford to lose that money?”

We believe investing is one of the best ways of creating wealth, but there are no shortcuts.

Good investing is almost always long term – any schemes or investments which promise to make something out of nothing or to deliver extraordinary returns are likely to run in to trouble.

If you want to learn how to invest like a pro and to earn millions not lose them, download our free guide “How to become an expat millionaire” below.

About Simon Danaher

Simon Danaher previously worked for AES International, in marketing and communications.