The court ruling protected £156m in tax from the scheme, devised by NT Advisors LLP and sold by DFSG.
HMRC stated that there was a series of complicated financial transactions involved in the scheme, involving loan notes worth £6m, which was intended to exploit the tax rules on stock lending.
Rex Bretten QC, acting for Andrew Chappell, admitted to the tribunal his client had taken part in the scheme purely to avoid paying tax.
Chappell endorsed on 14 July 2005 a letter of engagement dated 27 July 2005 written to him by Benjamin Cooke of DFSG, with an address in Jersey, accepting that the terms of engagement set out in the letter fully recorded the agreement between Chappell and DFSG.
Chappell subsequently wrote an (undated) letter to Stuart Gower, then at SG Hambros Bank & Trust (Jersey) Limited (SGH), at an address in Jersey, regarding SGH’s role in the ‘proposed transactions’.
Witness statements were also received from two persons who were presented by Bretten as experts in the laws of the British Virgin Islands and the Isle of Man.
The tribunal found that the arrangements involved little more than signing pieces of paper and making entries in accounts. Money moved in a circle and the tribunal found that it achieved nothing for the purposes of the relevant tax law.
The tribunal also said that if the scheme had been successful, its effect would have been to make the payment of income tax voluntary.
Exchequer Secretary to the Treasury, David Gauke, said: “These schemes are an affront to the vast majority of businesses and people who pay what they owe. We will pursue the minority who do not play by the rules.
“The Government has made a significant investment into HMRC to track down and challenge tax dodgers and they will continue to make progress by closing down schemes set up for the sole purpose of avoiding paying tax.”
Last month HMRC invited participants in certain tax avoidance schemes to settle their tax liabilities without the need for litigation.
