HM Revenue and Customs (HMRC) has won a legal battle against a brain disorder research company that claimed tax relief on cash it did not use on research.

Brain Disorders Research Limited Partnership claimed £122 million of cash was spent researching disorders such as depression and Attention Deficit Hyperactivity Disorder (ADHD), when in fact it had spent only £7 million.

The scheme, promoted by Matrix Securities, was designed to create an impression the money was being used for research while it sought to claim reliefs that were not due, said HMRC.

‘We’re relentless in pursing those who use contrived, artificial schemes to try to avoid tax.  The message is clear – it just doesn’t pay to try to avoid tax,’ said David Richardson, HMRC director general for customer compliance.

The case - which was heard at Upper Tribunal - agreed with an earlier ruling that at least part of the contract was ‘a sham’.

The scheme worked by a system where partners took out two 15-year loans of £53 million 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 money, apart from that used to pay promoter fees, was used to cover the loan and interest.

The appellants in the case are appealing the decision.

Earlier this week HMRC annouced that it brought in a record £29 billion haul as its clamp down on tax avoidance schemes began to bite.

The government office has a 80% success rate in convicting tax avoidance cases.