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 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.
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.”
Hargreaves Lansdown senior investment manager Adrian Lowcock says: “Companies spend a huge amount of money avoiding tax and HMRC should have been clamping down on this a long time ago.”