TaxCorporate TaxPru defeated in £105m swaps appeal

Pru defeated in £105m swaps appeal

Life insurer fails in special commission appeal to claim £105m of foreign exchange tax relief

prudential logo

Giant life insurer Prudential has lost its appeal to claim a £105m tax
deduction generated from instruments known as a tax-efficient off-market swaps
(TOMS).

Special commissioners Sir Stephen Oliver and Theodore Wallace turned down the
Pru’s appeal against a closure notice against the deduction by HM Revenue &
Customs.

The decision is set to have major repercussions for several other
mega-companies which also bought similar products before they were blocked by
legislation.

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

TOMS schemes exploited a gap in legislation that allowed companies to claim
the premium paid on foreign exchange against tax. The special commissioners
ruled that this should not have been allowed.

Prudential bought the scheme from Ernst & Young as a way of utilising
‘idle funds’, the decision revealed.

Further reading:

Read the
full
decision

Multi-nationals wait on £1bn swaps
verdict

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