HMRC has successfully challenged a tax avoidance scheme to allow wealthy people to pay little or no tax on their income, in a court ruling that it said will protect £156m in tax.
The case, Andrew Chappell and the commissioners for HMRC, first-tier tribunal, UKFTT 98 focused on a scheme devised by NT Advisors LLP and sold by Dominion Fiduciary Services Group, which had 305 users, HMRC said.
Rex Bretten QC, acting for Andrew Chappell, acknowledged that his client had taken part in the scheme solely for tax avoidance.
HMRC specialist investigators unravelled the series of complicated financial transactions involved in the scheme, involving loan notes worth £6 million, which was intended to exploit the tax rules on stock lending.
However, the tribunal found that the arrangements involved little more than signing pieces of paper and making entries in accounts.
Money moved in a circle and the tribunal found that it achieved nothing for the purposes of the relevant tax law. The tribunal said that if the scheme had been successful, its effect would have been to make the payment of income tax voluntary.
Exchequer Secretary to the Treasury, David Gauke, said: “The government is committed to tackling tax avoidance schemes like this one which are artificial and work against the rules set by Parliament. These schemes are an affront to the vast majority of businesses and people who pay what they owe. We will pursue the minority who do not play by the rules.
“The government has made a significant investment into HMRC to track down and challenge tax dodgers and they will continue to make progress by closing down schemes set up for the sole purpose of avoiding paying tax.”
A GAAR will be introduced in 2013.