Press release

Morgan Stanley’s £60m tax avoidance scheme beaten in court

FTSE 100 company Land Securities has lost a court battle with HMRC that could have cost the UK at least £60 million.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Tax avoidance
Tax avoidance scheme beaten in court

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

Land Securities bought back the shares at the inflated price, claiming that the effect of an existing anti-avoidance rule was that they had made a “loss” of £200 million that could be used as a deduction against tax. The company claimed, in tribunal, that disallowing the loss would not be fair as it would be out of pocket if it sold the shares in the future. The tribunal disallowed the loss.

Exchequer Secretary David Gauke said:

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’s Director General for Business Tax, Jim Harra, said:

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 £60 million 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.

In Budget 2013, the Government published Levelling the tax playing field, setting out progress in the drive against tax avoidance.

The anti-avoidance announcement made at Budget 2013 will bring in £4.6 billion in new revenue over the next five years.

Six corporate tax loopholes were closed by Budget 2013, protecting over £1 billion in revenue and yielding over £500 million.

Since 2010, HMRC has won more than 50 tax avoidance cases, protecting billions of pounds.

The Upper Tribunal (Tax and Chancery Chamber) sat in London on 29 and 30 January 2013. The decision is available here.

Recent HM Courts & Tribunals Service (HMCTS) decisions on tax cases are available here.

Published 27 March 2013