Following a decision by The Court of Appeal, in favour of HMRC in a tax avoidance case, 200 people who used the ‘artificial’ tax avoidance scheme now face paying back tax in full, plus fees for using the scheme.
The Court of Appeal rejected a taxpayer’s appeal against HMRC action, for his involvement in an artificial tax avoidance scheme that saw him try to avoid an estimated £11m in tax. According to HMRC the tax avoidance scheme “was an artificial, circular, self-cancelling scheme designed with no purpose other than to avoid tax”.
PwC Tax Avoidance Scheme closed down by HMRCThe tax avoidance scheme in question was marketed by the major accountancy firm, PriceWaterhouseCoopers (PwC), The Telegraph has confirmed.
Following the outcome of the tax avoidance case, a spokesperson for PwC, said:
“We aim to provide balanced, informed advice which takes into account not only current tax legislation but also current practice and case law. The case reported today relates to tax planning undertaken some years ago and planning of this nature is no longer recommended to our clients.”
The Telegraph also reported that the government ‘could gain billion of pounds in tax revenues’ after the Appeal Court released judgement that the tax avoidance scheme is ‘invalid’.
Experts have estimated that the total cost of lost tax from all 200 people involved in the tax avoidance scheme will be around £100m.However; the Appeal Court decision, according to Richard Evans, reporting in the Telegraph, is said to have set a “precedent that could mean billions of pounds potentially avoided tax will instead flow to the public purse”.
“To my mind, this appeal was a thinly disguised attempt to undermine the Ramsay principle. Once it was accepted that the principleLady Justice Hallet disagrees with ‘aggressive’ tax avoidance remains valid, and once the findings of the First Tier Tax Tribunal were accepted, this appeal was doomed to fail,” said Lady Justice Hallet, one of the Appeal Court Judges.
Losing the case to HMRC at the Appeal Court was businessman, Howard Scholfield, who was sold the tax avoidance scheme by PriceWaterhouseCoopers accountants, in order to avoid payments of capital gains tax on £10.7m. The tax avoidance scheme, now ruled as ‘invalid, involved a series of complex transactions that went round in a circle with the effect of avoiding capital gains tax due.
Exchequer Secretary to the Treasury, David Guake, commented on HMRC’s tax avoidance victory:
“This is a great result for the country and it’s another example of HMRC taking firm action against the avoidance schemes that would otherwise deprive the UK of billions of pounds. HMRC has a strong track record of quickly and effectively challenging avoidance through the courts, and anyone thinking of using such a scheme needs to carefully consider that.
“When millions of hard working families are playing by the rules, paying what they have to, we will not put up with the use of cleverly structured schemes designed purely to get around the rules. I hope that real lessons are learnt from the Court of Appeal’s decision.”
A milestone victory for the taxman, it seems a standard has now been set in court that sends out the message that ‘artificial’ and ‘aggressive’ tax avoidance arrangements will no longer be tolerated.