HMRC defeats three more corporate avoidance schemes

HM Revenue and Customs (HMRC) has clocked up another three major legal victories over corporate tax avoidance schemes, protecting over £100 million of tax.

The successes include a Court of Appeal win concerning an avoidance scheme used by a number of large businesses. The lead case was Vocalspruce Limited, and there were 43 follower cases – a combined total of £85.4 million of tax was at stake. A number of other users of the scheme have already settled with HMRC, protecting a further £65.7 million.

The second case is an Upper Tribunal decision in HMRC’s favour in a case involving Fidex Ltd, a subsidiary of the global banking group BNP Paribas – a ruling which protects £17.2 million in tax.

In the third case, a First-Tier Tribunal found for HMRC against an avoidance scheme used by one of the UK’s biggest waste management companies, Biffa Group. Biffa's case, along with two other cases on use of the same scheme, involve around £15 million of tax. More than £16 million had already been settled by other users of the scheme ahead of the litigation.

Financial Secretary to the Treasury David Gauke said:

“The message coming out of these cases is clear – entering into a tax avoidance scheme can be complex, expensive and cause extensive reputational damage for the companies involved.

“Anyone who’s already using a scheme, or considering joining one, should think long and hard about the consequences of trying to avoid paying the tax that is due.”

Jennie Granger, Director General Enforcement and Compliance, HMRC, said:

“All three of these substantial and significant judgments further vindicate our strong stance against tax avoidance – we won’t hesitate to litigate if a satisfactory settlement can’t be reached through discussion.”

“In the case of the scheme used by Vocalspruce, our position has now been backed by two tribunals and the Court of Appeal, adding to our already strong record which sees us win 80% of cases we litigate.”

Notes for Editors

  
1. The Court of Appeal (CoA) judgement in HMRC’s favour against Vocalspruce Limited relates to an avoidance scheme promoted by PricewaterhouseCoopers in 2003 and 2004. Under the scheme, Vocalspruce’s then-parent company, Brixton Plc, tried to make otherwise taxable profits on loan notes non-taxable by exploiting what it claimed was a loophole in the Finance Act 1996.
 
2. The CoA decision can be read at http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWCA/Civ/2014/1302.html&query=vocalspruce&method=boolean
 
3. More information on the earlier Upper Tribunal (UT) ruling in HMRC’s favour in this case can be found at http://www.mynewsdesk.com/uk/hm-revenue-customs-hmrc/pressreleases/hmrc-court-wins-protect-over-ps1-billion-888089
 
4. The UT judgment in HMRC’s favour against Fidex Ltd relates to an avoidance scheme suggested by Swiss Re. It aimed to create a substantial tax deduction by taking advantage of different accounting standards governing when assets should be recognised. Specific legislation was introduced to block the scheme.
 
5. The UT decision is available on request from HMRC Press Office
 
6. The First-Tier Tribunal (FTT) judgment in HMRC’s favour against Biffa Group relates to an avoidance scheme marketed by Deloitte in 2005. The case involved finance provided within a group of companies. It aimed to allow one group company to get tax relief on payments to another group company without tax on the second company’s receipt.
 
7. The FTT judgement can be read at http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=8070     
 
8. Follow HMRC Press Office on Twitter @HMRCpressoffice
 
9. HMRC’s flickr channel www.flickr.com/hmrcgovuk