The scheme was promoted by Matrix Securities and been intended to shelter about £80m from the taxman.
According to a statement from HMRC, a Jersey-registered limited partnership claimed to be trading in the UK. The partnership focused on creating and exploiting intellectual property from research into vaccines targeting diseases such as HIV, flu and hepatitis B.
The statement further explained that 83 investors in the partnership invested £28m of their own cash and £86m in bank loans. The partnership claimed a first-year trading loss of nearly £193m, creating £77m in tax relief. HMRC said this would have given them an almost £50m return on their personal investments.
However, HMRC Specialist Investigators discovered that only £14m had been spent on research and development into vaccines. As a result, a tribunal agreed that individual partners were entitled to tax relief of no more than £14m of the losses. The tribunal further decided that £7m in fees that the partnership had paid to a subsidiary of the scheme promoters failed to qualify for tax relief. Interest relief on the loans that had been used in the scheme was also restricted.
Since the scheme was implemented, HMRC said it has introduced further targeted anti-avoidance legislation to prevent similar schemes being set up.
Exchequer secretary David Gauke said: “The Government is committed to tackling tax avoidance and will close down those schemes that are artificial and contrived ways of exploiting the rules, as Parliament intended. The vast majority of businesses and individuals pay what they owe but there are a minority who try to dodge their taxes.
“Significant reinvestment has been made into HMRC to pursue and challenge the tax dodgers and they will take decisive action to close down schemes with the sole purpose of avoiding paying tax.”
