The three cases all concerned what HMRC dubbed “aggressive” tax avoidance schemes and which it claims would have deprived the UK of about £200m in tax revenue.
The most recent case was heard on 30 July and concerned an investor called Nicholas Barnes, one of about 100 investors who had used a scheme to avoid £100m in tax. The investors were using what the UK court has now ruled was “a designed and marketed tax avoidance scheme” which aimed to exploit a “mismatch” between two tax regimes involving the loan of UK government bonds.
In another case, HMRC said the defendant, Howard Schofield, had spent more than £200,000 in order to set up the scheme which the UK’s Court of Appeal ruled simply “did not work”.
Schofield used the scheme shortly after selling his business in order to avoid paying capital gains tax on £10m he made when selling his business in the 2003/2004 tax year. The scheme, which was marketed by Pricewaterhouse Coopers, created an artificial loss, with the aim of Schofield therefore not having to pay tax on the profit.
The third case related to the directors of asset management company Sloane Roberts who were paid “significant bonuses”. HMRC said the directors “considered a number of tax avoidance schemes, modifying the one they had chosen when the legislation was changed to counter that type of scheme”.
However, a UK court ruled on the 16 July that this scheme did not work either. About £13m of tax was at stake.
“These wins in the courts are a victory for the vast majority of taxpayers who do not try to dodge their taxes,” said HMRC’s director general of business tax, Jim Harra.
“They send a clear message to tax avoiders - HMRC will challenge tax avoidance relentlessly and we will beat you.
“We have now had three major court successes in avoidance cases in the last month alone and I hope this sends a very clear message: These schemes don’t come cheap, you carry a serious risk that you’ll end up paying the tax and interest on top of a set-up charge which can run into the hundreds of thousands of pounds. So you have to ask yourself whether it’s really worth it.”