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HMRC wins £29 million tax avoidance case

Press release   •   Jul 23, 2015 12:30 BST

HM Revenue and Customs (HMRC) has defeated an artificial tax avoidance scheme involving the Brain Disorders Research Limited Partnership and Neil Hockin (one of the partners), after the First-Tier Tribunal ruled against the users’ attempts to claim £29 million in tax relief. The investors claimed to have spent £122 million on research, when in fact only £7 million reached the genuine research company.

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. However, the Tribunal found that as the partnership was not trading, no tax relief was due.

Jennie Granger, HMRC Director General, Enforcement and Compliance, said:

"This win sends a clear message to those who still try to market and use tax avoidance schemes – HMRC will continue to challenge them, in the courts if necessary.

“This particular scheme was doubly offensive as it risks bringing fundraising for medical research into disrepute."

This is the latest in a series of tax tribunal wins for HMRC, with tribunals finding in HMRC’s favour in over 80 per cent of avoidance cases that taxpayers choose to litigate.

The UK has generous 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 £9.5 billion in tax relief has been claimed.

Notes for editors

1. The First-Tier Tribunal decision is available to read at:

2. The intention of the scheme was to enable investors to make large claims to interest relief on their borrowings.

The partners took out two 15-year loans of £53 million each and invested these, together with £13 million of their own money, into the Brain Disorders Research Limited Partnership.

The partnership paid £122 million to a Jersey-registered company, Numology Limited, to fund research into depression and Attention Deficit Hyperactivity Disorder (ADHD). The partnership then claimed capital allowances on this full amount.

Numology Limited then subcontracted the entire research project to an Australian biotechnology company for £7 million. The other monies, apart from those used to pay promoter fees, were used to cover the loan and interest.

3. The Tribunal agreed with HMRC that certain elements in the documents were a sham. It also went further in stating that there was a possible element of sham in relation to fees paid. It also noted that:

  • No more than the £7 million paid to the subcontractor was spent on scientific research
  • The partnership was not trading, even in relation to the £7 million actually incurred on research
  • Capital allowances were not due
  • Interest was not allowable as it was defeated by the anti-avoidance legislation
  • Fees paid were not wholly or exclusively incurred.

4. A wide range of measures have been brought in during the past two years, including monitoring of high risk promoters and expanding and strengthening the highly effective Disclosure of Tax Avoidance Schemes (DOTAS) regime. Failure to disclose avoidance schemes to HMRC can result in fines of up to £1 million.

5. More information on what HMRC is doing to tackle tax avoidance is available at

6. Follow HMRC Press Office on Twitter @HMRCpressoffice

7. HMRC’s Flickr channel:

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.