Exotic avoidance victory for Bank of Ireland

The bank’s UK subsidiary, Bank of Ireland Britain Holdings, created the
losses through the use of ‘repos’, complex financing schemes that use
derivative-like structures.

The scheme allowed Bank of Ireland to claim relief on losses of £3.6m.

Advisers said the scheme had now been closed down after rules were brought in
to prevent the dodges.

The subsidiary took advantage of mechanical legislation to claim tax relief
on the losses, and even though it was obvious that the scheme was designed
solely to avoid tax, High Court judge Justice Henderson ruled that because the
legislation was not specific enough, the scheme should be allowed to stand.

PricewaterhouseCoopers tax
partner John Whiting said: ‘This arrangement saw a glitch in the legislation
allowing the Bank of Ireland to claim the deduction. It was a classic avoidance
scheme.’

The case demonstrates the problem caused by over-complex tax legislation,
Whiting said.

‘The lessons from the case are that complex anti-avoidance legislation
creates gaps of its own,’ he said.