HM Revenue & Customs said Friday that it had “protected more than £1bn in tax” for the British economy over the past week, after winning three key court victories involving investment schemes that failed to justify their tax deductions.
The latest win involved a ruling against a Jersey-registered limited partnership, Clavis Liberty Fund 1 LP scheme, which had sought to make use of dividends paid on shares to a company based in the Cayman Islands to create an artificial tax loss worth around £18m.
Each of the 99 users of the scheme contributed a sum, which was used, together with a large bank loan, to acquire the rights to the dividends.
HMRC said that the judgment was “significant” as it was the first time that that this particular anti-avoidance legislation has been tested in court. It is understood that it may affect a number of outstanding cases in which similar arrangements to manage tax liability were used.
Jennie Granger, HMRC’s director general of enforcement and compliance, said the week’s three wins represented “an important success for HMRC both in terms of the money that [they] will bring in, and the powerful signal [they send] to anyone who might be tempted to use any form of offshore arrangement to avoid paying the tax that is due.
“It’s time for people to get out of these schemes – they don’t work and we will defeat them.”
The win announced today, which took place at the UK’s First-tier Tribunal, follows last week’s decision by the Supreme Court to refuse permission for Eclipse Film Partners No. (35) LLP to appeal against a Court of Appeal ruling, which HMRC said had “protected” £635m in tax; and another Revenue win, against Fidex Ltd at the Court of Appeal, which had “protected” a further £18m in tax.
To see the Tribunal’s decision in the Clavis Liberty Fund case, click here.