TaxAdministrationOffshore clampdown continues as HMRC protects £365m

Offshore clampdown continues as HMRC protects £365m

First-tier tribunal rules against Clavis Liberty Fund, over the shadowy use of dividend funds

THE BATTLE between HMRC and offshore tax schemes continues, with the taxman claiming victory in a first-tier tribunal against a Cayman-registered company, protecting £365m of taxpayer money.

HMRC disputed the intentions of the Clavis Liberty Fund 1 LP scheme, which created an artificial tax loss for its 99 investors.

Clavis Liberty involved a limited partnership, registered in Jersey, which claimed to carry out UK trade. Each of the 99 users contributed a sum, which was used, together with a large bank loan, to acquire rights to dividends declared by a Cayman-registered company.

‘Important success’ for the taxman

The partnership claimed a deduction for the cost of the dividend rights but sought to exclude the dividend payments paid from its trading profits, giving rise to a loss.

Jennie Granger, director general of enforcement and compliance at HMRC labelled the first-tier tribunal win as an ‘important success’ for the taxman.

“In the space of a week HMRC has secured three court victories, protecting more than £1billion in tax and proving that tax avoidance doesn’t pay. It’s time for people to get out of these schemes – they don’t work and we will defeat them,” continued Grainger.

HMRC claims that the tax at stake in this case is £18m, and a further £347 million across similar cases.

This is the third court victory in the space of a week for the government department.

HMRC secured a win worth £635m in tax in its long running Supreme Court battle with film avoidance scheme Eclipse 35, and has also won a Court of Appeal case against BNP Paribas subsidiary Fidex Ltd, which protects a further £18 million in tax.

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