As every hedge fund manager knows, the gap between the spirit and the letter of the law is, above all else, an arbitrage opportunity. But finding dollars in the nooks and crannies of the system depends as much on the skills it takes to detect gray areas as it does on the brass it takes to exploit them.
On the brassiest extreme of that spectrum, meet Michael Mabbutt, formerly of Thames River Capital:
Her Majesty’s Revenue & Customs wrote to Michael Mabbutt, then at Thames River Capital, saying it wanted to open an inquiry into the tax year ending April 6, 2009, according to evidence from a London court hearing. The U.K. tax year ends on April 5. Mabbutt’s lawyers say the error invalidates the notice.
Whether his argument will hold up in Her Majesty's courts doesn't matter so much (it's worth asking how how much legal effort and expense the estimated $835,900 in question even warrants). What really counts is all the free publicity Mabbutt, now fund manager and founding partner at 1167 Capital, gets out of the case. For every potential investor who thinks Mabbutt's alleged confusion is “disingenuous,” as the government argues, there's someone else looking for a hedge fund manager who has the frugality – and the stones – to tell tax authorities this:
“HMRC have only themselves to blame for what happened in this case,” they said in documents from the hearing.