Multi-nationals wait on £1bn swaps verdict

The ruling on tax-efficient off-market swaps (TOMS) is set to be handed down
by the special commissioners.

Dave Hartnett, director general of HM Revenue & Customs, told parliament
in 2004 that the schemes ‘could well have cost a billion to the Exchequer’
before they were blocked.

The case is understood to involve Prudential, which used a TOMS scheme at the
start of the decade. Hartnett said in 2004 that the schemes were marketed
to about 30 multi-nationals and large corporates.

The use of TOMS was always strongly opposed by HMRC and has since been
blocked by legislation, but the judgment in the Pru case is still likely to have
wider implications for the many companies that bought the scheme in the past.

The judgment on the case, heard by Sir Stephen Oliver just before the summer
recess, has been circulated among the key parties and is due for public release
early next week.

Heather Self, international tax partner at Grant Thornton, said TOMS schemes
took advantage of a gap in legislation that allowed companies to claim the
premium they paid on foreign exchange against tax. The Pru case is expected to
deal with whether this should have been allowed.

Until now most experts have felt that TOMS schemes did have an underlying
commercial driver, but HMRC has challenged this opinion at the special
commissioners with regards to the Pru.

Both HMRC and the Pru said they could not comment on the case until the
decision was made available to the public.

See here
when the decision comes out

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