British and German investigators are taking a closer look at Brookfield Aviation International, which is at the centre of a tax evasion allegations. Brookfield, based in Surrey, is alleged to be supplying half of the pilots used by Ryanair, which is based in Dublin, Ireland.
The investigation is coming from two angles, with German prosecutors put on to the company in 2010 when an anonymous report alleged Brookfield was a 'letterbox company' for Ryanair. German investigators notified UK authorities in 2011 that Brookfield's relationship with Ryanair's pilots was "pseudo self-employment, even under British law". The Germans suspected Brookfield was evading income tax and social security payments for its German aircrew.
HMRC is conducting its own investigation, and has "issued 'protective assessments' for £47m relating to British income tax and national insurance contributions between 2010 and 2013," according to The Times. HMRC told Brookfield that it failed to believe that pilots "had any genuine right of substitution", meaning it was not possible for Brookfield to appoint a substitute pilot with an airline and pay for that pilot. The non-ministerial department that is responsible for the collection of taxes said that Brookfield should have paid PAYE tax and National Insurance on the pilots' payments.
The Surrey police have now executed a high court warrant to conduct a search of Brookfield's UK offices on behalf of German prosecutors. German prosecutor Hans Peter Gandner said there was an official investigation into Brookfield Aviation for tax evasion and failure to pay social security and the pilots involved are accused of being accessories.
"We are waiting for documents from the British authorities about their investigation into Brookfield and Ryanair. After we get the documents, I'll either write the indictment or close the case," said Gandner.
A spokesman for Ryanair denied that Brookfield was a letterbox company: "We are aware of the investigation and are assisting the German authorities. Ryanair requires all of its contractors to comply fully with national regulations and authorities. Brookfield is one of a number of contractor agencies that Ryanair and other companies use."
Brookfield Aviation's solicitors said: "No charges of tax evasion or any similar offences have been made against Brookfield in the UK, Germany or anywhere else. Brookfield maintains it has paid all tax due to all relevant authorities. Brookfield has co-operated with HMRC's inquiry and will continue to do so. No steps are being taken by HMRC to enforce the protective assessment, which was made simply to allow the Revenue to complete its inquiry without becoming time-barred."
A German High Court judgement claimed that "quite contrary to Ryanair's statements that these pilots were independent sub-contractors, the pilots are employed by [Brookfield] and are leased to Ryanair". Brookfield is alleged to be dealing with 1,600 "ostensibly self-employed pilots" with Ryanair and about 300 Irish companies that "mainly serve to conceal an employment relationship with Ryanair," claimed the German High Court in its judgement.
The German Court heard that alleged conduct by Brookfield would constitute offences including "fraud, cheating the revenue [and] fraudulent evasion of VAT" in the UK.
A court in Koblenz has accused James Duffield and David George, owners and directors at Brookfield, of "an especially serious case of tax evasion". Wolfgang Bohnen, a prosecutor in Koblenz, said: "These companies mainly serve to conceal an employment relationship with Ryanair".
Brookfield processes the salaries of 1,600 pilots, and deals with about 300 Irish companies administered by trustees, according to German officials. The aviation resources leasing company posted an annual turnover of £119m (€165m, $181m) in November. Ryanair expects to rake in more than £730m in profits in 2016.