Pru loses High Court swaps battle

Companies attempting to avoid up to £1bn in tax through currency swap schemes
have been dealt a new blow after the
High Court threw
out an appeal on the set-ups.

Insurer Prudential lost its appeal against a special commissioners judgment
in a decision handed down late last week.

The schemes entailed the structuring of currency transactions to generate a
tax deduction but they infuriated HM Revenue & Customs.

Speaking to parliament in 2004, HMRC director general Dave Hartnett estimated
that the schemes had cost the Exchequer as much as £1bn. Hartnett said the plans
had been marketed to 30 multi-nationals and large corporates.

He also stressed that the schemes were one reason why the government
introduced the tax avoidance disclosure regime.

The High Court judgment left open the issue of how much tax Prudential would
have to pay as a result of the judgment, with further issues over the £105m tax
deduction in dispute set to be discussed.

HMRC said: ‘We welcome this High Court decision, which upholds HMRC’s view of
the tax treatment of advance payments of capital in currency swaps.’

Further Reading:

Read the High
Court judgment

Special
commissioners: Pru defeated in £105m swaps appeal