Multi-nationals wait on £1bn swaps verdict

The ruling on tax-efficient off-market swaps (TOMS) is set to be handed down by the special commissioners.

Dave Hartnett, director general of HM Revenue & Customs, told parliament in 2004 that the schemes ‘could well have cost a billion to the Exchequer’ before they were blocked.

The case is understood to involve Prudential, which used a TOMS scheme at the start of the decade. Hartnett said in 2004 that the schemes were marketed narrowly
to about 30 multi-nationals and large corporates.

The use of TOMS was always strongly opposed by HMRC and has since been blocked by legislation, but the judgment in the Pru case is still likely to have wider implications for the many companies that bought the scheme in the past.

The judgment on the case, heard by Sir Stephen Oliver just before the summer recess, has been circulated among the key parties and is due for public release early next week.

Heather Self, international tax partner at Grant Thornton, said TOMS schemes took advantage of a gap in legislation that allowed companies to claim the premium they paid on foreign exchange against tax. The Pru case is expected to deal with whether this should have been allowed.

Until now most experts have felt that TOMS schemes did have an underlying commercial driver, but HMRC has challenged this opinion at the special commissioners with regards to the Pru.

Both HMRC and the Pru said they could not comment on the case until the decision was made available to the public.

See here when the decision comes out