The First Tier Tax Tribunal ruled against Brain Disorders Research Limited Partnership and partner Neil Hockin’s attempts at claiming £29 million in tax relief.
The investors had claimed that they had spent £122 million in research when in fact only £7million went to the genuine research company. It was reported that the partners both took loans of £53 million over a 15 year period, together with £13 million of their own funds and invested this into Brain Disorders Research Limited Partnership.
£122 million was paid by the partnership to a company called Numology, registered in Jersey, in order to fund research into ADHD (Attention Deficit Hyperactivity Disorder). The partnership then claimed capital allowances on the full amount.
The research project was then subcontracted by Numology to an Australian biotechnical company for £7 million. Apart from fees paid to promoters, the remaining monies were used to cover interest and loan fees.
However, the First Tier Tax Tribunal stated that the partnership was not trading and therefore not tax relief was due. The Tribunal agreed that part of the schemes documents and fees paid were in fact a sham.
HMRC’s Director General for Enforcement and Compliance, Jennie Granger 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 medical fundraising into disrepute.”
HMRC have now secured £26.6 billion in revenue in a bid to clamp down in tax avoidance and evasion over the last year and this latest decision is part of a series of wins for HMRC with Tribunals finding in HMRC’s favour in over 80% of cases.
The success of these cases can be attributed to the success of the introduction of Accelerated Payments in 2014.