What HMRCs win over Abbey National means
After a landmark win for HMRC against Abbey National Treasury Services (ANTS) and Cater Allen International in June, the Revenue has yet more cause to celebrate
After a first-tier tribunal decision in June secured £16m in unpaid tax from ANTS, HMRC successfully protected a further £45m late last week. The outcome has big implications for similar schemes as HMRC increasingly focuses its attention on avoidance cases.
The first-tier tribunal’s ruling related to structured finance schemes disclosed to HMRC under the DOTAS regime. If successful, these schemes created a tax mismatch within a group of companies, which would mean a substantial tax loss in one company balanced by an equal and opposite profit arising elsewhere in the group in a tax-free form. The group as a whole has derived no real economic loss, other than the costs associated with implementing the scheme. In this case the corporation tax at stake was £45m.
Of course, a DOTAS notification means that it is a racing certainty that HMRC will test the transactions to destruction. Users of such schemes may be sure that they are in for the long haul, with no surety of outcome. The appeal here related to 2008.
Since this scheme was implemented, there has been a paradigm shift in public opinion. This has meant that company tax policy is now influenced to a much greater extent by soft factors. High profile companies must now take account of the likely commercial consequences of tax avoidance, as well as the purely legal ones. It is at least questionable whether Abbey National (now part of Santander) would have implemented the structure in the present climate.
Finally, HMRC should perhaps guard against revelling too much in its success at this stage. Given the numbers involved it is highly likely that this decision will be appealed, although I wouldn’t bet too heavily on a favourable outcome for the taxpayer.
