Tax avoidance scheme beaten in court

A marketed tax avoidance scheme which claimed to license newspaper mastheads to avoid tax has been successfully challenged by HM Revenue and Customs (HMRC) in court. 

The decision has protected £5.6 million and potentially £104 million in 67 similar cases.

The Tribunal ruled that subsidiaries of Iliffe News and Media Limited were not entitled to a tax deduction for payments they had made to their parent company to use their own mastheads.

This is the latest in a series of Tribunal decisions in HMRC’s favour which take forward the department’s commitment to create a level tax playing field for all businesses. 

Jim Harra, HMRC’s Director General for Business Tax, welcomed the outcome:

“This is an important ruling against a marketed avoidance scheme and the latest in a series of successful HMRC challenges to such schemes. We will continue to challenge artificial arrangements such as this in the interests of the vast majority of businesses and people who choose to play by the rules.”

Notes for editors

1. Between 2003 and 2005 various trading subsidiaries of the Iliffe News and Media group assigned unregistered trade marks (mastheads) to the parent company and then licensed them back for a fixed term in return for a lump sum payment. 

2. The group claimed that the lump sum fee in the hands of the licensor was within the Capital Gains regime and claimed that no gain, no loss provisions applied. 

3. On the other side of the equation the trading subsidiaries claimed that the grant of the licence was a new intangible fixed asset enabling them to claim tax relief on the payments.

4. The legislation was changed in December 2005 to prevent this type of scheme operating. 

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6. HMRC’s flickr channel www.flickr.com/hmrcgovuk