Tax avoidance on loan interest scheme shut
The First-tier Tax Tribunal has ruled against a tax avoidance scheme which replaced interest on a loan between two companies in the same group with shares issued to a third one.
HM Revenue and Custom’s (HMRC) challenge to this scheme has protected £120 million tax.
The tribunal decided the scheme did not work. The company that received the shares had to pay tax.
HMRC’s challenge to the avoidance scheme used by Commercial Estates Group, the Westbury group and other large groups has already collected £70 million. A further £50 million can now be collected as a result of the tribunal’s decision.
David Gauke, Exchequer Secretary to the Treasury, said:
This tribunal decision is another blow to those who try to use complex schemes to get around the tax rules.
This is the latest in a series of wins by HMRC against tax avoiders. Over £1 billion has been protected in the first six months of 2013 and HMRC will continue to challenge schemes designed to beat the tax system on behalf of the vast majority of individuals and businesses who play by the rules.
More information can be found here.
This case is Versteegh & Others v HMRC. HMRC was represented by Julian Ghosh QC and Elisabeth Wilson of Pump Court Tax