HMRC triumphs over tax avoidance scheme expected to net £325m
The Upper Tribunal ruled the scheme was “artificial and uncommercial”
HMRC has emerged victorious over a multi-million pound tax avoidance scheme used by the wealthy.
The Revenue will win back £18m, but expects the ruling to have wider implications for hundreds of users of other Liberty schemes, predicted to protect £325m in unpaid tax.
The Upper Tribunal ruled in support of the First-tier Tribunal’s decision that the scheme, known as Clavis Liberty Fund 1 Limited Partnership, was “artificial and uncommercial”.
The scheme was promoted by Mercury Tax Group to high earners and involved creating artificial tax losses that individuals could later claim against other income to trim their tax bill.
The scheme involved a Jersey registered partnership that claimed to carry out trade in the UK. Each user of the scheme contributed a sum to acquire rights to dividends declared by Helios, a Cayman Island registered company, for the sum of around £60m.
The partnership would then claim a deduction for the cost of purchasing the dividend rights, but tried to exclude the dividends received from its trading results, subsequently creating a loss that would diminish users’ tax bills.
Penny Ciniewicz, HMRC’s director general for customer compliance, said: “This is a brilliant victory that will bring in millions of pounds.
“We have repeatedly warned people about the financial consequences of using tax avoidance schemes. More and more people are coming forward and settling what they owe because they know the game is up.”
She added: “Our message is clear – steer clear of tax avoidance schemes or, like Liberty’s users, you’ll face a hefty consequence.”
HMRC continues to find success in its crack down against tax avoidance. Earlier this year it was revealed the Revenue won 22 out of 26 cases in the past year, and recently had a High Court ruling in their favour against Newcastle United in a tax avoidance investigation
