Karen Millen is declared bankrupt over £6million tax bill

Karen Millen is declared bankrupt over £6million tax bill

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Karen Millen, the fashion designer who founded the upmarket high street brand, has been declared bankrupt over unpaid tax.

Miss Millen, who opened her first shop almost 35 years ago, failed to pay £6million to HM Revenue and Customs over her involvement in a tax avoidance scheme.

The Times reported that the mother-of-three was declared bankrupt in the High Court on Tuesday and faces losing her £3million home in Kent.





But Ms Millen said she was 'deeply devastated', and had been a victim of fraud by collapsed Icelandic bank Kaupthing which financed the buyer who bought her business in 2004 for £95million.

She said they had blocked her ability to start again.

It came after the administrators to Kaupthing, which now own Karen Millen, had prevented the designer from using her name to launch a new brand.

She wanted to use the trade marks 'Karen Millen', and 'Karen' for a new homewares and lifestyle business, focused on the US and China.

But the High Court ruled that it would be confusing for the original brand.



And Miss Millen also lost money in the financial crisis after other Icelandic investments failed.

The 55-year-old said: 'The past nine years have been one long legal battle against the banks to try to achieve justice and have now taken their toll.

'I fell all of my energy has been eaten up by negativity.



'It is my intention now to finally put the past behind me and I look forward to a clean start.'

According The Times Miss Millen said that in 2001 her accountants told her to enter a tax avoidance scheme known as Round the World.

How Karen Millen became a high street fashion favourite

Karen Millen set up her business with her partner Kevin Stanford in 1981, taking out a £100 loan which they used to manufacture cotton shirts and sell them to their friends.



In 1983, the pair opened their first store in Maidstone, Kent, which was followed a few years later by other branches in South East England.



The brand expanded throughout the 1990s to become one of the most recognisable chain of stores on the UK High Street, and it now has branches in countries including the United States, Indonesia, Austria and Russia.



The complex scheme promised its 90 or more members they could avoid a total of £70million in capital gains tax on the sale of shares, by transferring the shares to trustees in Mauritius.

However, HMRC successfully challenged the scheme in 2010, and issued Miss Millen with a notice to pay about £6million in September last year.

The Court of Appeal found the scheme was 'carefully orchestrated' from the UK, and so could be taxed in this country.

But Miss Millen said her battles with Kaupthing had left her unable to pay the bill - putting her home, any second properties, cars and valuables at risk.

It marks a change of fortunes for the designer, who made £35million when she sold her share of the business in 2004.

She had founded the fashion company at the age of 19 with her former partner Kevin Stanford, beginning with 100 metres of white cotton and a £100 loan.



The brand grew into a high street stalwart which became a fashion benchmark for women's work wear. In 2008, she was awarded an OBE for her services to fashion, and held interests in Oasis, All Saints, Whistles, Ghost, House of Fraser and French Connection.

However, she and Mr Stanford then lost millions in the Icelandic banking crash - and Kaupthing's collapse.

This is because about 40 per cent of the £95million deal was not settled when Kaupthing collapsed, according to previously filed court documents.

Designer lost out in Iceland crash

Before the Icelandic bank collapse, Ms Millen and her business partner - former husband Kevin Stanford - were flying high in the fashion industry, with interests in Oasis, Whistles, All Saints, House of Fraser, Ghost and Principles, as well as Karen Millen.



But when the Icelandic financial industry collapsed so comprehensively the two, who divorced in 2001 but maintained the commercial interests they had together, lost much of what they owned.



The Icelandic banks had helped fund the investment group Baugur, which owned major stakes in Karen Millen.



By the time of the Icelandic crash, Ms Millen and Mr Stanford had sold the majority of their shares in Karen Millen, with Baugur becoming one of the main investors.



The two were left with an 8 per cent stake in Baugur, a 4 per cent stake in Kaupthing, and money invested in further Icelandic financial firms - all of which went bust in the collapse.