TaxPersonal TaxHMRC refused leave to appeal insurance avoidance scheme

HMRC refused leave to appeal insurance avoidance scheme

Supreme Court prevents taxman appealing "unattractive" Mayes decision

THE SUPREME COURT has refused HM Revenue & Customs leave to appeal the lower courts’ decision to allow a tax avoidance scheme involving second hand insurance policies.

In April, the Court of Appeal upheld the High Court’s decision in the Mayes case, which permitted taxpayers to claim an income tax deduction for losses arising from second-hand life insurance policies (SHIPS).

The scheme was marketed by tax advisors Matrix Tax Solutions. It required clients to pay into the life assurance policies, which they would surrender, thereby incurring a tax loss without actually paying out.

It ran in 2003/04 and HMRC estimated the tax loss at around £24m. The case was originally heard in 2009 by Special Commissioners, who found in favour of HMRC.

However, Matrix won the subsequent appeals. The judges in the appeal court said their own decision was “unattractive” but found that the “court cannot lawfully hold” in favour of HMRC.

Adam Craggs, partner at law firm RPC, said: “The case is notable as it demonstrates the limits of the Ramsay principle as an anti-avoidance tool when faced with tax legislation that is itself artificial in its operation.”

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