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HMRC claims victory against £200m tax avoidance schemes

Treasury 480

HM Revenue & Customs has claimed victory against three tax avoidance schemes which could have cost the Treasury £200m in lost revenue.

The first case, which was heard in the Court of Appeal on 11 July, involves a taxpayer who sold his business in 2003/04, making a profit of around £10m.

The Revenue says the individual used a tax avoidance scheme to create an artificial loss so that he would not have to pay tax on the profit he made when he sold his business. It says the individual spent £200,000 on the scheme.

The ruling in favour of HMRC is expected to prevent £90m of tax revenue being lost.

The second case, heard in the First Tier Tribunal on 16 July, relates to bonuses paid to directors of Sloane Robinson Investment Services.

HMRC says the directors considered a number of tax avoidance schemes for their bonuses before modifying the one they had chosen when legislation changed to counter that type of scheme.

The First Tier Tribunal ruled the modified scheme still did not comply with UK rules, potentially saving the Treasury £13m in lost tax receipts.

The third case, heard in the Upper Tribunal on 30 July, relates to a scheme which aimed to exploit a mismatch between two tax regimes.

HMRC says the scheme involved borrowing UK government bonds generating an interest coupon for one day when an interest coupon was due. A payment representative of that coupon was then made to the lender, for which tax relief was claimed.

At the same time the scheme envisaged that no tax would be due in respect of the interest coupon received.

The Revenue says the scheme was described by the First Tier Tribunal as a “designed and marketed tax avoidance scheme” which had been taken up by over 100 individuals. It says the total tax at stake was around £100m.

All of the rulings in favour of HMRC are subject to appeal.

Treasury exchequer secretary David Gauke says: “The Government is committed to tackling aggressive tax avoidance schemes and HMRC will pursue their users through the courts where necessary.

“These three HMRC wins are very welcome, demonstrating that if an avoidance scheme promises results that seem too good to be true, they probably are.”

Taxbriefs editorial director Danby Bloch says: “These are three pretty different tax schemes concerned with avoiding capital gains on one transaction, income tax on some bonuses and tax on an interest payment. They are all ‘artificial’ schemes and reflect the law of previous years as well as an increasing intolerance of such schemes in the courts.

“Since then and especially this year, anti-avoidance law has been ratcheted up a good deal more.”


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