Taxman defeats £77m avoidance scheme

by Calum Fuller

More from this author

18 Jan 2013

  • Comments
HM Revenue and Customs

A TAX AVOIDANCE SCHEME that attempted to take advantage of rules set up to encourage genuine medical research has been defeated in court.

The Matrix Securities scheme operated through a Jersey-registered limited partnership claiming it was trading in the UK. The partnership focussed on creating and exploiting intellectual property from medical research into vaccines targeting diseases such as HIV, flu and hepatitis B.

Some 83 investors in the scheme used £28m from their own pocket, £86m in bank loans and claimed £193m first-year trading loss to create £77m in tax relief that would have given them a £50m return on their investments.

However, HM Revenue & Customs investigators discovered £14m had been spent on genuine research and vaccine development. As a result, a tribunal held that relief was only due on no more than £14m of the losses, and further decided that £7m in fees that the partnership had paid to a subsidiary of the scheme promoters failed to qualify for tax relief.

Interest relief on the loans was also limited.

Since the scheme was set up, HMRC has introduced further anti-avoidance measures in order to prevent similar schemes from operating in future.

HMRC director-general of business tax Jim Harra said: "This is another important victory for HMRC as we continue to challenge artificial tax avoidance schemes. This type of marketed avoidance scheme is unfair to the vast majority of businesses and people who play by the rules. Anyone tempted should be warned that these schemes carry a serious risk that you'll end up paying the tax and interest on top of a set-up charge, which can run into the hundreds of thousands of pounds."

Richard Rhys of Rebus Investment Solutions, which acts for victims of mis-sold tax avoidance schemes, said the Matrix scheme was "high-risk".

"This scheme was suitable for only a select few, which has undoubtedly found its way into the hands of investors who really should not have been taking on this level of risk. Mr Harra of HMRC is right, that investors not only will have to repay the tax relief, but will also have to pay interest on any tax reliefs they have claimed," he said.

Click here to take part in Accountancy Age's debate on tax avoidance.

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send
HM Revenue & Customs

Head Of Financial Control

HM Revenue & Customs, Telford, Full Time, Permanent/p>

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.