According to The Times Gary, Mark Owen and Howard Donald now face having to pay back tens of millions of pounds after a court found that they were part of a tax avoidance scheme.
The newspaper reported that the trio and their manager Jonathan Wild "poured £66 million into two partnerships styled as music-industry investment schemes but which were artificial tax shelters for the super-rich."
The partnerships are said to have been set up by a company called Icebreaker Management to offer musicians the chance to avoid paying tax on roughly £63million earned through world tours and record sales.
Judge Colin Bishopp, who led the hearing on Friday told The Times: "Icebreaker is, and was known and understood by all concerned to be, a tax avoidance scheme.
"The aim was to secure [tax] relief for members, and to inflate the scale of the relief by unnecessary borrowing," he said. "No serious or even moderately sophisticated investor, genuinely seeking a profit... would rationally have chosen an Icebreaker partnership.
"The predominant purpose of entering the scheme was to achieve a tax saving."
Howard Donald, Gary Barlow and Mark Owen at the Ivor Novello Awards
Neither Gary, Mark, Howard or Jonathan has commented on the claims so far, although in 2012, when the allegations were first made, in 2012, lawyers representing the men confirmed they were investors in the partnerships, but believed they were legitimate enterprises and not tax-avoidance schemes.
The situation is similar to that of BBC radio 1 DJ Chris Moyles.
In February a court heard that Chris had claimed to be a second-hand car dealer in order to save £1million in tax.
The 40-year-old sought to give his version of events on Twitter posting: "I want to comment about a recent tribunal tax ruling. Upon advice, I signed up to a scheme which I was assured was legal.
"Despite this, my knowledge of the dealings of the scheme were naïve," he said. "I'm not a tax expert and acted on advice I was given. This was a mistake and I accept the ruling without reservation.
"I take full responsibility and have learnt a valuable lesson."