HMRC defeats £30m EY tax avoidance scheme

HMRC has defeated a tax avoidance scheme used by a major brewery and marketed by EY, protecting around £30m in tax.

The avoidance scheme, marketed by EY in 2003, to brewery Greene King and other large groups, involved loans between group companies. The aim was for one company in a group to get tax relief on interest paid to another group company without that other company paying tax on the income it received.

HMRC initially defeated the scheme in the First-tier Tribunal in 2011, and in 2014 the Upper Tribunal upheld this decision. The decision means that HMRC will recover a total of £30m in due taxes from Greene King and others that have used the scheme.

Financial secretary to the Treasury, Jane Ellison said: “This is a significant victory. Tax avoidance schemes like these attempt to deprive the Exchequer of money that’s needed to provide the vital public services and infrastructure we all rely on. We will not let such schemes go unchallenged.”

Jim Harra, director general of business tax, HMRC, said: “HMRC is cracking down hard on tax avoidance. We have a strong record of defeating avoidance schemes in the tribunals and courts, where we win 80% of cases.

“We will pursue taxpayers who participate in avoidance schemes, whether they are individuals or large corporations.”

This win follows on from HMRC’s recent success in Cyclops Engineering, a scheme looking to exploit disguised remuneration rules to avoid PAYE and National Insurance being deducted, which protected more than £55m.

So far in 2016-17, HMRC has already protected a cumulative £648m of tax through their litigation avoidance successes.

A Greene King spokesman said: “We accept the Court of Appeal’s decision on this long-running case. Greene King is a British business with a 217-year heritage and a major contributor to the Treasury with over a quarter of our turnover paid to HMRC. We are proud of the significant contribution we make to the UK and the Treasury and in the last financial year alone we paid £570m in taxes.

“We always ensure we comply with tax regulations by following the advice of our legal counsel and taxation experts, including in this case, Ernst & Young LLP.”

EY declined to comment.