HM Revenue & Customs has won a legal challenge to protect £156m in tax from a tax avoidance scheme set up for wealthy individuals to reduce their income tax.
The scheme was devised by a firm called NT Advisors and sold by Dominion Fiduciary Services Group, which had 305 users.
HMRC challenged the scheme at a tax tribunal after specialist investigators unravelled a series of complex transactions involving loan notes worth £6m which were intended to exploit tax rules on stock lending.
The tribunal found the transactions only involved signing pieces of paper and making entries in accounts, with money moving around in a circle. The tribunal said if the scheme had been successful it would have effectively meant its users would pay income tax voluntarily.
Rex Bretten QC, acting for Andrew Chappell, admitted to the tribunal his client had taken part in the scheme purely to avoid paying tax.
The Exchequer Secretary to the Treasury David Gauke says: “The Government is committed to tackling tax avoidance schemes like this one which are artificial and work against the rules set by Parliament. These schemes are an affront to the vast majority of businesses and people who pay what they owe. We will pursue the minority who do not play by the rules.”
HMRC director general for business tax Jim Harra says: “People who are tempted by this type of scheme should be warned they carry serious risks. These include paying advisers expensive set-up charges, which can run into hundreds of thousands of pounds, on top of tax that is due and interest for late payment.
“HMRC will challenge these schemes, however complex they appear to be. We have the skills and the expertise to effectively challenge tax avoidance and we will continue to do so.”