The aim of the scheme was to enable investors to make large claims to interest relief on their borrowings. Large capital allowances claims were also made.
The tribunal found that as the partnership was not trading, no tax relief was due.
How the avoidance scheme worked
The partners took out two 15-year loans of £53m each and invested these, together with £13m of their own money, into the Brain Disorders Research Limited Partnership.
The partnership paid £122m to a Jersey-registered company, Numology Limited, to fund research into depression and Attention Deficit Hyperactivity Disorder.
The partnership claimed capital allowances on this full amount.
Numology Limited then subcontracted the entire research project to an Australian biotechnology company for £7m. The other monies, apart from those used to pay promoter fees, were used to cover the loan and interest.
Research tax breaks
The UK has tax reliefs to support genuine research and development (R&D), which includes medical research. Since the R&D tax credit schemes were launched in 2000‐01, over 100,000 claims have been made and more than £9.5bn in tax relief has been claimed.