£27m victory for HMRC in BoI phantom tax loophole case
Bank of Ireland subsidiary fails in its quest to avoid millions in tax
A BANK has failed in its attempt to avoid £27m in corporation tax after HMRC convinced the Court of Appeal that it tried to exploit a loophole that did not exist.
The taxman challenged the Bank of Ireland (BoI) as it looked to avoid corporation tax through a subsidiary – former building society Bristol and West.
The avoidance scheme sought to exploit the move from one piece of legislation to another. Contracts were moved from the BoI subsidiary under the old legislation but were received by a second subsidiary under the new legislation.
All parties agreed the novation was done solely to avoid tax but the BoI argued that the scheme worked because the move from one piece of legislation to the other created a loophole.
However the Court of Appeal ruled in HMRC’s favour. Another £5.9m is at stake in a follower case while the other five users of the scheme conceded before the legal action began, paying £215m in tax.
Jim Harra, HMRC’s director general of business tax described BoI’s actions as a “cynical attempt to exploit a non-existent tax loophole. We will continue to investigate and pursue those who try to avoid paying their fair share on behalf of the majority who play by the rules, and pay the tax they owe.”
Earlier this month it was revealed that HMRC collected nearly half a billion pounds last year through an enhanced campaign against tax avoidance schemes.
