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HMRC defeats P&O avoidance scheme

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19th Jul 2013
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British shipping company P&O has failed in its bid to use a complex international tax avoidance scheme to avoid paying corporation tax.

The case, Peninsular & Oriental Steam Navigation Company v Commissioners for HMRC [2013] UKFTT 322, centred on P&O’s attempt to get an extra £14m in tax relief by artificially boosting the credit due for tax paid on dividend income.

HMRC successfully challenged the scheme in the first tier tribunal, which ruled that the transactions were all part of an “elaborate trick” designed to exploit the rules.

The tribunal ruled: “It is clear that the scheme would only work so long as every participant in it was either a captive company or a stooge employee of a company within the P&O group.”

It also found that it was “designed and implemented for no reason other than tax avoidance.”

David Gauke, exchequer secretary to the Treasury, said he was delighted HMRC defeated this attempt by a major company to artificially reduce its tax bill by exploiting an “extremely complex” international financial structure.

“The government has made it very clear that we won’t put up with aggressive tax avoidance and we have resourced HMRC to take on even the most complex and convoluted schemes, as this tribunal decision shows,” Gauke said.

HMRC said in a statement that £154m of tax had been protected as a result of the tribunal victory, adding that the legislation being exploited was repealed in 2005 to prevent such practices.

HMRC claims to have protected more £1bn since the start of the year in a series of successful challenges to tax avoidance schemes.

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