Tax avoidance scheme loses third bid for legitimacy

Monday 3 February 2014

A serial promoter of tax avoidance has lots its third bid for legitimacy, HM Revenue and Customs (HMRC) has revealed.

NT Advisors had been pitching a scheme, known as Project Corbiere, to wealthy individuals.

Designed by Matthew Jenner, the tax avoidance programme involved transferring millions of pounds of UK government bonds backwards and forwards to the British Virgin Islands. This would create an unwarranted tax deduction of £1.2 million.

At the Court of Appeal, it was ruled that the scheme was specifically created to avoid tax  - a ruling that has saved the country around £100 million.

Of the 240 individuals that first began to use the scheme in 2005, many have now settled their tax bills.

However, HMRC stresses that around £80 million could have been lost if NT Advisors had been successful in their appeal.

The first-tier tribunal, upper tribunal and the Court of Appeal have now each all ruled in HMRC's favour.

"This is an important win for HMRC and is the latest in a string of successes," David Gauke, exchequer secretary to the Treasury, said.

"It is excellent news for the vast majority of taxpayers who play by the rules. Many users of this scheme have already accepted the inevitable and settled up with HMRC and those who haven’t should do so quickly."

He added that HMRC has been given nearly £1 billion to put an end to tax avoidance and with plans in the pipeline to give the body greater -powers, those that don't comply with regulations are quickly running out of places to hide.

This latest decision comes after a first-tier tribunal dismissed arguments from Consulting Overseas Limited that their income tax avoidance scheme was a legitimate tax planning measure.

The case involved a programme in which individuals were sold a remuneration package that got contractors to sign up as employees of Sandfield Consultants Ltd. From here, tax avoiders would agree to receive around two-thirds of their income as loans in Romanian, Belorussian or Uzbekistani currency. A currency trade was then supposed to turn earnings into non-taxable foreign exchange gains.

However, it was deemed that the programme did amount to employment income. What's more, there was no evidence that the initial loans ever existed.

Consequently, it is believed up to £400 million in tax has been protected by ruling against Consulting Overseas Limited.

"The unprecedented package of counter-avoidance measures announced in the Autumn Statement, combined with HMRC’s record of winning over 80 per cent of all avoidance cases taken to court, shows the writing is on the wall for the minority who are prepared to use marketed tax avoidance schemes to get around the rules," Mr Gauke said.

Of the 348 users of the Consulting Overseas Limited scheme, 226 have already settled with HMRC. This has resulted in the recouping of around £5 million in tax. Those individuals that have yet to pay up are now being pursued by HMRC.

Meanwhile, a consultation has been launched on plans to increase the circumstances in which the government body can demand instant payment from users of tax avoidance schemes, supporting HMRC in its anti-avoidance efforts further.

By Victoria McDonnell

Get in touch

Please select your type of enquiry:

Brookson on Twitter