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HMRC wins £60m Morgan Stanley tax avoidance battle

HMRC Letter 480

HM Revenue & Customs has won a £60m court battle over a tax avoidance scheme involving US investment bank Morgan Stanley and FTSE 100 company Land Securities.

Under the scheme, Land Securities sold shares in one of its group companies to a Cayman Island subsidiary of Morgan Stanley, which then inflated the value of the shares by pumping money into the subsidiary.

HMRC says Land Securities then bought back the shares at the inflated price, claiming the effect of an existing anti-avoidance rule was that they had made a “loss” of £200m which could be used as a deduction against tax.

In the tribunal Land Securities claimed disallowing the loss would not be fair as it would lose out if it sold the shares in the future. The tribunal disallowed the loss.

Treasury exchequer secretary David Gauke says: “At a time when we must all pay our fair share, it is increasingly unacceptable for individuals and businesses to try to avoid or evade paying their taxes.

“HMRC has a strong set of weapons to tackle tax avoidance and the outcome of this case and the ruling should send a clear signal to the minority engaged in avoidance activities – the net is closing in.”

HMRC director general for business tax Jim Harra says: “This scheme was flagrant tax avoidance that provided finance to a FTSE 100 company that appeared cheap because the UK taxpayer was expected to pick up a £60m bill.

“This is HMRC’s eighth consecutive success in court against tax avoidance, sending a clear message that indulging in tax avoidance is now a very high risk and expensive strategy, because HMRC will continue to challenge avoidance at every turn.”

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