A tax avoidance scheme promoted by Matrix Securities has been successfully challenged by HM Revenue & Customs (HMRC) in court.
HMRC said the medical research-based tax avoidance scheme had created £77 million in tax relief.
Eighty three investors invested in a Jersey-registered limited partnership, which claimed to be trading in the UK, focused on creating and exploiting intellectual property from research into vaccines targeting diseases such as HIV, flu and hepatitis B.
The investors used £28 million of their own cash and £86 million in bank loans.
The partnership claimed a first-year trading loss of nearly £193 million, creating £77 million in tax relief. This would have given the investors an almost £50 million return on their personal investments.
However, only £14 million had been spent on medical research, HMRC said.
As a result, a tribunal agreed that individual partners were entitled to a tax relief of no more than £14 million and further, that the £7 million in fees that it paid to a subsidiary of the scheme promoters failed to qualify as tax relief.
The interest relief on the loans that had been used in the scheme was also restricted.
Exchequer Secretary David Gauke said: ‘The government is committed to tackling tax avoidance and will close down those schemes that are artificial and contrived ways of exploiting the rules.
‘Significant reinvestment has been made into HMRC to pursue and challenge the tax dodgers and they will take decisive action to close down schemes with the sole purpose of avoiding paying tax.’