Tax dodge quashed by special inquiry
A scheme to avoid paying corporation tax on a $20m (#12.8m) company sale has been outlawed by the Special Commissioners.
The commissioners’ decision upholds case law principles derived from Ramsay v IRC in 1982 demanding identification of a real transaction carried out by taxpayers by disregarding any artificial steps inserted for avoidance purposes.
Spectros International, a US/UK business now in creditors’ voluntary liquidation, sold a wholly-owned subsidiary, Spectros International Holdings, to US company Applied Biosystems Inc in 1986 for $1,000.
But HM Inspector of Taxes argued that ABI’s agreement to also pay off a manufactured $20m debt of SIH, a liability retained by Spectros, amounted to a benefit for the company. Spectros later used the $20m to pay a dividend.
The commissioners accepted that the dividend was an inserted step with no commercial purpose other than tax avoidance.
They said: ‘To us, it does not seem to matter whether the $20m was paid to Spectros. SIH or the bank. It is clear that $20m had to be applied in some way, in order to release Spectros’ security with the bank.’
Price Waterhouse tax partner John Whiting said: ‘It’s confirmation that you can squash a scheme if there is an artificial avoidance step inserted into it. Spectros was clearly $20m better off, even though the amount that went into its coffers was only $1,000.’
In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...
View resourceIn recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...
View resourceIn a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...
View resourceThe first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...
View resourceHMRC sees the profit or loss made on buying and selling of exchange tokens as within the charge to Capital Gains Tax (CGT). Read More...
View articleThe recent IR35 case involving former Liverpool footballer and Sky Sports presenter, Phil Thompson, has drawn attention to the complexities and implic...
View articleFrom January 1, 2024, HMRC will implement new tax rules affecting individuals who sell items on platforms like Etsy, Depop, and Vinted. The new regula...
View articleHMRC reveal a small majority of people are soldiering a significant proportion of income and capital gains tax, following FOI request. Data has reigni...
View articleSteven Pinhey, technical officer at the Association of Taxation Technicians (ATT), considers how the rules on deductible expenses work in a social med...
View articleATT technical officer, David Wright, considers the implications of HMRC’s decision to remove employees with income between £100,000 and £150,000 from ...
View articleThis was the fourth largest borrowing year since records began in 1993 Read More...
View articleATT technical officer, David Wright, provides an overview of the welcome relaxation to CGT provisions for separating couples looking to transfer asset...
View article