Stagecoach tax avoidance hits the buffers

A tax avoidance scheme used by Stagecoach to cut their tax bill by £11 million has been stopped in its tracks.

The bus and train firm tried to avoid tax by using transactions within the Stagecoach group to artificially create a loss.

The complex artificial scheme involved moving money between companies in the Stagecoach group in an attempt to create a large loss in one company. However there was no equivalent gain in the other companies. The scheme was intended to artificially reduce Stagecoach’s Corporation Tax bill in the accounting period ending 30 April 2011.

The First-tier Tribunal ruled the scheme did not work, agreeing with all of HMRC’s legal challenges. There are 11 other similar cases which will be affected by this decision and the total tax at stake is £179 million.

HMRC has previously secured £485 million in tax and interest from 16 other groups where similar schemes were used to try and avoid tax.

Financial Secretary to the Treasury, David Gauke said:

“This is a significant victory and should serve as a warning to those tempted by tax avoidance – it simply does not work.

“We have put in place the lowest rate of Corporation Tax in the G7 but we are absolutely clear that every penny of it will be paid.”

HMRC’s Director General of Business Tax, Jim Harra, said:

“This was clear tax avoidance. It was an attempt to manufacture losses to deny the public purse the tax due.

“We will challenge any attempt to abuse the rules to avoid paying what is owed.”

The First-tier Tribunal ruled there was no loss for Stagecoach for tax purposes and therefore the scheme did not work so there could be no reduction in their Corporation Tax bill.

Notes to editors:

1. The First-tier Tribunal decision can be found here.

2. HMRC has already collected £485m in tax and interest from 16 other groups. These cases where all settled when the taxpayer agreed to pay the full tax and interest due except Abbey National where the First-tier Tribunal ruled in HMRC’s favour.

3. Follow HMRC Press Office on Twitter @HMRCpressoffice.

4. HMRC's Flickr channel: http://www.flickr.com/hmrc.gov.uk.