HMRC claims victory against £29 million tax avoidance scheme

HM Revenue & Customs (HMRC) has won a case against £29 million ‘sham’ tax avoidance scheme in a tribunal case, reports Citywire.

The First-Tier Tribunal rules against tax avoidance scheme the Brain Disorders Research Limited Partnership and partner Neil Hockin’s attempts to claim £29 million in tax relief.

The investors claimed to have spent £122 million research, when in fact only £7 million reached the genuine research company.

The partners took out two 15-year loans of £53 million each and invested these, together with £13 million of their own money, into the Brain Disorders Research Limited Partnership.

The Partnership paid £122 million to a Jersey-registered company called Numology to fund research into depression and Attention Deficit Hyperactivity Disorder (ADHD). The partnership then claimed capital allowances on this full amount.

Numology then subcontracted the entire research project to an Australian biotechnology company for £7 million. The other monies, apart from those used to pay promoter fees, were used to cover the loan and interest.

However, the tribunal found that as the partnership was not trading, no tax relief was due.

HMRC said the Tribunal agreed there were elements in the scheme’s documents and fees paid that were a ‘sham’.

Jennie Granger, HMRC director general, enforcement and compliance, said that the victory sent a clear message to those still trying to market and use tax avoidance schemes.

‘This win sends a clear message to those who still try to market and use tax avoidance schemes – HMRC will continue to challenge them, in the courts if necessary,’ she said.

‘This particular scheme was doubly offensive as it risks bringing fundraising for medical research into disrepute.’

The decision is the latest in a series of tax tribunal wins for HMRC, with tribunals finding in the revenue’s favour in over 80% of avoidance cases.

HMRC has secured £26.6 billion in revenue from its tax avoidance and evasion crackdown last year.

In HMRC’s annual accounts for 2014/15, the taxman got back nearly £3 billion more for its tax avoidance and evasion clampdown than in 2012/13 when it got back £24 billion.

The taxman’s success was in part due to the introduction of its ‘accelerated payments’ power in 2014 through the Finance Act.