Bristol & West tax avoidance plan scuppered
Upper tribunal rejects avoidance scheme using discrepancy between two regimes
A £27M TAX AVOIDANCE ARRANGEMENT used by the former Bristol & West building society has lost an appeal in the upper-tier tribunal.
The tribunal said that Bristol & West transferred interest rate swaps to another Bank of Ireland subsidiary purely in the hope of securing a tax advantage. A further £215m was protected when other followers of the plan settled before being taken to tribunal.
Bristol & West transferred interest rate swaps from one group company to another for £91m. They sought to take advantage of a change in the regime for taxing derivatives, wrongly believing the credit would disappear because one of the companies involved in the interest rate swaps was within the new regime, while the other was not. The plan was designed to exploit that asymmetry.
David Gauke, Exchequer Secretary to the Treasury, welcomed the outcome: “This case is the result of HMRC’s relentless work against a highly complex and speculative avoidance gamble that, unchallenged, would have deprived the country of over £27m in corporation tax.
“HMRC has shown that, no matter how complex or intricate the case is, it will not hesitate to litigate when the rules are being abused.”