Tax avoidance scheme could double brewer’s bill
28 Apr 2014 04:43 PM
A tax avoidance scheme designed to make taxable
interest payments disappear has been blocked for the second time by a tax
tribunal.
The
scheme, marketed by Ernst & Young in 2003 to brewery Greene King plc and
other large groups, involved loans between group companies. The aim was for one
company in a group to get tax relief on interest paid to another group company
without that other company paying tax on the income it
received.
HM
Revenue and Customs (HMRC) will now receive £36 million from users of the
scheme after the Upper Tribunal ruled that it did not work. Greene King
risks having to pay approximately twice the tax it tried to avoid after the
tribunal left open precisely how the interest was taxable in a second group
company.
Exchequer Secretary David Gauke said:
The
vast majority of taxpayers play by the rules and the government will continue
to take touch action to tackle the minority who seek to avoid their
responsibilities. HMRC wins 80 per cent of the cases it takes to
court and this win, in a very complex case, sends another clear message to tax
avoiders.
Anyone who gets involved in tax avoidance schemes is
playing with fire.HMRC will pursue those involved through the courts,
ensuring it collects the taxes that are due.
The
First-tier Tribunal had said that the companies could not legitimately
complain if the scheme failed in its purpose and instead resulted in the
payment of twice the amount of tax they tried to avoid.