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Avoidance scheme lands Abbeyland with liability

Press Release   •   Jun 04, 2013 09:48 BST

A property development company has failed in its attempt to avoid paying tax on a property sale by creating a “loss” of £1.6 million. It used a scheme that involved buying and surrendering investment bonds issued by a life assurance company.

HMRC has already recovered tax, interest and penalties of £250 million from cases closely resembling the scheme used by Abbeyland Ltd. 

The First-tier Tribunal ruled:

“The acquisition and subsequent disposal of the bonds were solely for the purposes of a tax avoidance scheme, all the steps of which were pre-ordained, with no commercial motive or effect (other than the necessary incurring of commissions and fees) . . . ”

The Exchequer Secretary to the Treasury, David Gauke, said:

“HMRC has protected over £1 billion this year by taking avoidance schemes to court and is now winning almost 90 per cent of the avoidance cases it litigates.

“Although the vast majority of taxpayers play by the rules, there are some avoidance promoters that believe the more technically complex and contrived the scheme, the safer it is from being challenged. They are wrong and the Government has provided HMRC with the resources to comprehensively challenge and clamp down on avoidance.”

Notes for editors

1.  Since the start of 2013 HMRC has protected over £1 billion through litigating avoidance schemes.

2.  This the 12th win in the courts against avoidance this year.  

3.  The First-tier Tribunal’s decision is published here.

4.  The First-tier Tribunal’s decision followed the Court of Appeal’s approach in the broadly similar case of Drummond indisallowing the Abbeyland loss:  Drummond

5.  In July 2012 HMRC consulted on ways to make people more aware of the risks of engaging in high-risk tax avoidance schemes which do not deliver the tax result claimed. Lifting the Lid on Tax Avoidance Schemes:

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_RatesCodesTools&propertyType=document&id=HMCE_PROD1_032207

Responses to the consultation and next steps:

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&columns=1&id=HMCE_PROD1_032454

6. In March 2013 HMRC published Levelling the Tax Playing Field, reporting on progress made in cracking down on avoidance and evasion: http://hmrc.gov.uk/budget2013/level-tax-playing-field.pdf

Issued by HM Revenue & Customs Press Office

HM Revenue & Customs (HMRC) is the UK’s tax authority.

HMRC is responsible for making sure that the money is available to fund the UK’s public services and for helping families and individuals with targeted financial support.