E&Y avoidance scheme draws in Revenue
The Inland Revenue is set to investigate a tax avoidance scheme devised by Ernst & Young and used by more than 30 UK companies at an estimated cost of £1bn to the public purse.
Link: Tax avoidance disclosure under Lords scrutiny
The FT quotes Whitehall officials as saying the scheme ‘relied on unusual transactions in derivatives known as currency swaps to deliver big reductions in corporation tax for the companies’.
As a result, companies that used the scheme are having their 2002/2003 accounts scrutinised by Revenue officials.
Legislation has since been enacted to prevent such schemes being used to cut tax bills, but the Revenue is reportedly looking at ways to challenge the tax reductions the companies claimed before the legislation took effect.
A test case could soon end up in the courts.
E&Y denies that it promotes abusive tax schemes.
News of the crackdown comes soon after the introduction of new requirements forcing accountants and other tax advisors to disclose all avoidance schemes being marketed to clients.
It also follows the establishment of a global task force set up the UK, US, Canada and Australia to combat abusive tax transactions.