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Take That star's tax avoidance condemned by Britain's Cameron

By Tom Bergin

LONDON (Reuters) - Prime Minister David Cameron on Monday criticized a tax avoidance scheme used by one of Britain's biggest pop stars, but rejected calls to strip Gary Barlow of a state honor.

Barlow, two other members of his group Take That and their manager may have to pay more than 9 million pounds ($15 million) to the state after a judge found an investment scheme they had used was aimed primarily at avoiding tax.

Tax avoidance by other celebrities and by companies such as Starbucks and Amazon have angered the British public, and politicians were quick to condemn Barlow, with two members of parliament (MPs) suggesting he should return his "Order of the British Empire" (OBE), a medal he received for charity work.

Cameron told ITV: “I’m against these aggressive tax avoidance schemes ... Clearly what this scheme was, was wrong.”

But he said he did not support forcing Barlow, who publicly supported the prime minister's Conservative party during the 2010 general election campaign, to return his OBE.

Conservative MP Charlie Elphicke and Margaret Hodge, an MP with the opposition Labour party, told the Times newspaper it was questionable whether Barlow should retain the honor.

A spokesman for the band members declined comment. Their manager, Jonathan Wild, who invested in the same investment scheme, did not respond to requests for comment. Previously, representatives for the four said they paid "significant tax".

A judge said in a ruling published on Monday that members of dozens of partnerships were not entitled to use losses they incurred on investments in music rights and intellectual property to offset their tax bills because the primary intention of the partnership structures was to avoid tax rather than make a profit.

“The underlying, and fundamental, conclusion we have reached is that the Icebreaker scheme is, and was known and understood by all concerned to be, a tax avoidance scheme,” Tribunal Judge Colin Bishopp said in his ruling.

However, he added that: "it is not suggested that any part of the arrangements was a sham."

A spokesman for Icebreaker Management, which organized many of the partnerships, said it was disappointed by the ruling and was considering its options, which lawyers said could include an appeal.

Barlow, who has also served as a judge on entertainment show "The X Factor", his bandmates Mark Owen and Howard Donald, and manager Wild, invested around 5 million pounds in a partnership called Larkdale LLP, in 2010, accounts for the partnership show.

There is no suggestion that the two other band members, Robbie Williams and Jason Orange were involved.

The four also borrowed another 20.8 million pounds to contribute to the partnership, at least some of which came from Barclays Bank, filings show. The bank declined comment.

Larkdale generated a loss of 25.2 million pounds in 2010 which the members could have used to offset other income.

The total amount of losses claimed by the partnerships - and rejected by the judge - was 336 million pounds, according to the ruling.

Tax collection authority, HMRC, said 120 million pounds in tax payments was at stake, suggesting the loss reported by Larkdale could have been used to shave 8.8 million pounds off members' tax bills.

HMRC is entitled to claim interest on what it deems to be overdue tax, and penalties could also be charged, so any final bill could be higher.

An HMRC spokesman declined to say if it would seek penalties or interest, citing rules on taxpayer confidentiality.

(Editing by Robin Pomeroy)

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