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HMRC wins court battle against £156m avoidance scheme

by Daniel Grote on Feb 27, 2013 at 09:07

HMRC wins court battle against £156m avoidance scheme

HM Revenue & Customs (HMRC) has won a court battle against a £156 million tax avoidance scheme.

A tribunal has ruled against the scheme, constructed by NT Advisors and sold by Dominion Fiduciary Services Group, which had 305 users.

HMRC said the scheme was intended to exploit the tax rules on stock lending to enable users to pay little or no tax on their income.

Exchequer secretary to the Treasury David Gauke said: ‘The government is committed to tackling tax avoidance schemes like this one which are artificial and work against the rules set by parliament. These schemes are an affront to the vast majority of businesses and people who pay what they owe. We will pursue the minority who do not play by the rules.

23 comments so far. Why not have your say?


Feb 27, 2013 at 09:56

Well done HMRC.The sooner all these Accountant led schemes are abolished the better. Why should the Privileged few who can afford to pay the tax get away with it? It's just a shame HMRC don't tackle the [Alleged] real serial abusers like Barclays, Starbucks, Amazon & Co.... As that's where the real money is to be had.

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Feb 27, 2013 at 10:02

Agree with DP's IFA

And HMRC should also investigate the personal tax affairs of the "Accountants" etc, promoting these things. That would cut down their numbers

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Feb 27, 2013 at 10:16

Many IFAs have promoted tax avoidance schemes over the years and take fat commissions from them. SDLY mitigation, leveraged UCIS?

It needed RDR to get IFAs to finally give value for money by charging proportionate fees rather than taking commissions at levels that had no justifiable link to the value of the advice given.

I suggest that the above comments are a case of throwing stones in the financial advice greenhouse?

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Michael Brown

Feb 27, 2013 at 10:34

One can only hope that we again copy Australia ASAP where any tax avoidance scheme has to get authority before it can be made available to individuals and or companies.

If so schemes like this will never get off the ground and hopefully companies like the above will disappear for the good of all.

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Feb 27, 2013 at 10:36

Touched a nerve i see?! There would have been no such schemes to promote if it were not for accountants! Iam sure that the fat accountancy fees were well in excess of any IFA Payment if it were IFA's who promoted it? Can say that we have run on 100% allocation pre agreed fee amount or % well before RDR so no stones here! Also never got involved in any 'clever' schemes. I agree would be better if no one did.

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Derek Guyers

Feb 27, 2013 at 10:51

“………one which are artificial and work against the rules set by parliament.”

If parliament said clearly what it intended there wouldn’t be any dispute – we’d all know what the rules are. But parliament doesn’t speak clearly. So now we have GAAR so that the tax gatherers can say, we know you’ve behaved within the rules but we want more tax; send it to us. In many of these cases (Starbucks included), there’s no suggestion that the person/organisation involved broke the rules, just that sticking to the rules didn’t raise as much tax as some commentators would like to see.

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Richard R

Feb 27, 2013 at 11:03

There's far too much bluster about tax avoidance schemes, and far too much "scapegoating" going on. We all know how complicated tax rules and precedents are, and why is it wrong for anyone to construct their affairs to pay as little tax as possible NO MATTER HOW WEALTHY THEY ARE?

It really is the job of HMRC to "... pursue the minority who do not play by the rules" so let them do just that. But for goodness sake cut out the holier than thou nonsense, cut out the "I'm sorry" (well, not really) culture, and focus on the facts.

Tax avoidance is legal, pure and simple.

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Feb 27, 2013 at 11:04

What I can't work out is why there needs to be an scheme that pays 'introducer fees' that accountants can put their clients' money in?

I would have thought if a particular trail of transactions gave relief for certain individuals, the accountancy firm would arrange their clients' affairs accordingly. Certainly this is what firms like Starbucks have done.

Or is it because they want the 'income' but want to keep a distance from the process in order to try to avoid any liability if HMRC find against the validity of the scheme. When the investors in schemes that have been ruled against come to get their money, they will have suffered a loss as the commissions and fees from the accountancy introducer and the scheme promotors will be a substantial amount. I hope and expect the introducer accountancy practice, not its PI insurers to pay full recompense as it knew the rules and placed personal profit before client needs. If this recompense forces the accountancy practice into liquidation, will other accountants pick up the bill?

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Feb 27, 2013 at 11:06

Keep em coming HMRC. The only people that don't see this as a great step forward are the guilty ones.

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Murphy Richards

Feb 27, 2013 at 11:57

This scheme would have been closed down if my general anti avoidance bill were passed by this useless coalition government.


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Feb 27, 2013 at 12:08

Those with the most cash always seem to pay the least tax. Good to see that HMRC is clamping down on these schemes at last. I agree with Michael Brown that it would be better if the schemes sought approval prior to being launched. It would also be less costly to the tax-payer as there would be no question of legal fees.

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ms simpson

Feb 27, 2013 at 12:15

I do hope that we are not about to experience a repeat of the 1970.

As I recall the HMRC operated a similar crackdown. It very rapidly got completely out of hand.Egged on by the then Labour government and the Trade Unions, it rapidly developed into a pogrom against anyone even attempting to run a business and make a profit.

Doubtless this is all scaremongering on my part.

This couldn`t possibly happen again in the near future ......could it ?

Be careful what you wish for ... etc etc.

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Feb 27, 2013 at 13:27

Where has my comment gone?

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Jonny B via mobile

Feb 27, 2013 at 13:39

Tax avoidance in whatever form is perfectly legal, and the most obvious and well used versions are ISAs and pensions which are open to all. The legislation is clear and therefore no cost is required to implement legitimate use of the law.

However, if an individual choses to pay fees to an accountant and/or adviser, better placed to investigate the current legislation (set by Parliament), to reduce tax by benefiting from the prescribed rules then fair play to them.

In this case the interpretation was wrong so the scheme failed; some people with financial capacity to do so took an educated punt and it didn't work out.

HMRC's typically loose legislative drafting creates the loopholes that the individuals who can pay for advice will try to exploit. Well considered, tighter laws are the only way to stop this. But of course it's far better to have a mediocre success rate of occasionally stopping a scheme like this and then grand stand about it...

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Rob Simpson

Feb 27, 2013 at 13:48


Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this..

The first four men (the poorest) would pay nothing.

The fifth would pay £1.

The sixth would pay £3.

The seventh would pay £7.

The eighth would pay £12.

The ninth would pay £18

And the tenth man (the richest) would pay £59.

So, that's what they decided to do. The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your weekly beer by £20.” Drinks for the ten men would now cost just £80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the £20 windfall so that everyone would get his fair share?

They realized that £20 divided by six is £3.33 but if they subtracted that from everybody's share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fairer to reduce each man's bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.

And so, the fifth man, like the first four, now paid nothing (a 100% saving).

The sixth man now paid £2 instead of £3 (a 33% saving).

The seventh man now paid £5 instead of £7 (a 28% saving).

The eighth man now paid £9 instead of £12 (a 25% saving).

The ninth man now paid £14 instead of £18 (a 22% saving).

And the tenth man now paid £49 instead of £59 (a 16% saving).

Each of the last six was better off than before with the first four continuing to drink for free.

But, once outside the bar, the men began to compare their savings. "I only got £1 out of the £20 saving," declared the sixth man. He pointed to the tenth man, "but he got £10"

"Yes, that's right," exclaimed the fifth man. "I only saved £1 too. It's unfair that he got ten times more benefit than me"

"That's true" shouted the seventh man. "Why should he get £10 back, when I only got £2? The wealthy get all the breaks"

"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor"

The nine men surrounded the tenth and beat him up.

The next week the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important - they didn't have enough money between all of them to pay for even half of the bill.

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.

Professor of Economics.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible

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Feb 27, 2013 at 14:37

To quote Jonny B 'HMRC's typically loose legislative drafting creates the loopholes that the individuals who can pay for advice will try to exploit'. So if a 'punt has failed' then its HMRCs fault then?

Every day in every field the judiciary rule over the laws of the land. So it someone pops up and says' I know lads, I have a scheme here that allows you to steal from your clients with no comebacks, its legal, honest!' you agree with the sentiment as it is legal.

Legality has a disconnect to morality as the rules of law have to be written down and that is always subject to interpretation. Never confuse legality with morality or your marriage wont last long.

The rules of Golf are long enough, but if you ever read the tome 'decisions on the rules of golf' you know what I mean.

The main rules of golf are:

hit it

go find it

hit it again

until you hit it into a hole.

Don't stay in that hole my friend.

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Paul Davis

Feb 27, 2013 at 14:49

Absolutely love the tax explained in beer! Pure genius!!

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Richard Hardy

Feb 27, 2013 at 15:38

@ Rob, love the explanation. We received a similar explanation but with an American slant:

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama's socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, "OK, we will have an experiment in this class on Obama's plan". All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A.... (substituting grades for dollars - something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

Could not be any simpler than that.

Remember, there IS a test coming up. The 2012 elections.

These are possibly the 5 best sentences you'll ever read and all applicable to this experiment:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Politicians desperate for votes and not getting to grips with the problems.

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David Phan

Feb 27, 2013 at 17:35

Tax mitigation nowadays known as tax avoidance seems to be unacceptable by the government and being part of this is as bad a treason.

These schemes are perfectly legal and no different from say a self employed person paying themself a small salary and taking a large diviend, hence paying less tax.

I agree that some of the laws will need changing so the large corporations will pay more than they have been getting away with but the government needs to treat this with kid gloves rather bull in a china shop approach.

Companies such as Barclays, Starbucks will need to trade in the UK but Amazon has a distribution centre in the UK employing many people where they can easily move this. Firms need to make as much profit as possible to ensure they stay solvent when profits are down or years of losses.

What the Government needs to remember is that whilst these companies shy away from Corporation tax, they hire thousands of staff that pays income tax. If they move parts of their business abroad such as emerging markets then then it is the staff or ex staff that suffers. Who picks up the bill for the unemployed - The Government.

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Michael Brown

Feb 28, 2013 at 12:51

@ Hikky

Free fror a game as you obviously understand the game of golf!

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Michael Brown

Feb 28, 2013 at 12:53

@ Rob

I lost it after the 5th pin. Never could really handle beer.

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Michael Brown

Feb 28, 2013 at 12:53

@ Rob

I lost it after the 5th pint. Never could really handle beer.

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Feb 28, 2013 at 13:39

@ Mike

I hope to be free in the summer. I am now much less hip-hop than I used to be, but now am hip-op.!

Wedges at dawn eh?

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