HMRC has clawed back over £1bn in the first six months of this year from its campaign against corporate tax avoidance, including almost £88m from challenging a scheme promoted by PwC say Harris & Co chartered accountants Northampton, who specialise in providing accountancy services as small business accountants.
The scheme involved a company called Vocalspruce and revolved around the use of loan notes by Vocalspruce’s then-parent, FTSE 100 group Brixton plc.
Profits on loan notes are taxable, but the scheme set up by PwC aimed to make them non-taxable by exploiting what it claimed was a loophole in the Finance Act 1996, according to HMRC.
HMRC has now won a tax tribunal case against a scheme in a judgment it claimed could net Treasury coffers nearly £88m. The department says this case has delivered over £62m, as other users of the failed scheme settled up, and has major implications for 43 similar cases, which could bring in an additional £87m.
In a separate case, HMRC has also successfully challenged the shipping and logistics company P&O which it says sought to use a complex international tax avoidance scheme to avoid UK corporation tax. P&O aimed to get an extra £14m in tax relief by artificially boosting the credit due for tax paid on dividend income.
However, the First Tier Tribunal ruled that the transactions were all part of an ‘elaborate trick’ and were ‘designed and implemented for no reason other than tax avoidance’.
The Tribunal ruled: ‘It is clear that the scheme would only work so long as every participant in it was either a captive company or a stooge employee of a company within the P&O group.’
HMRC says it has protected £154m of tax as a result of this ruling. In addition, other major wins in the courts in 2012 which contributed to its £1bn of tax recovery were £600m from WHA; £135m from Project Blue; £60m from Land Securities; £50m from Abbeyland; and £30m from Bristol and West.
Gauke said: ‘The message coming out of these cases is clear – entering into a tax avoidance scheme can be complex, expensive and self defeating, and the taxpayer can even end up paying more than the original bill.’