Giant life insurer Prudential has lost its appeal to claim a £105m tax deduction generated from instruments known as a tax-efficient off-market swaps (TOMS).

Special commissioners Sir Stephen Oliver and Theodore Wallace turned down the Pru's appeal against a closure notice against the deduction by HM Revenue & Customs.

The decision is set to have major repercussions for several other mega-companies which also bought similar products before they were blocked by legislation.

Speaking to parliament in 2004, HMRC director general Dave Hartnett estimated that the schemes had cost the Exchequer as much as £1bn. Hartnett said TOMS had been marketed to 30 multi-nationals and large corporates.

TOMS schemes exploited a gap in legislation that allowed companies to claim the premium paid on foreign exchange against tax. The special commissioners ruled that this should not have been allowed.

Prudential bought the scheme from Ernst & Young as a way of utilising 'idle funds', the decision revealed.

Further reading:

Read the full decision

Multi-nationals wait on £1bn swaps verdict