HMRC wins £45m in second Abbey National avoidance case
HMRC has won another major tax avoidance case against Abbey National Treasury Services PLC (ANTS), protecting more than £85 million for UK taxpayers.
The First-tier Tribunal’s ruling will protect over £45 million tax from ANTS as well as another £40 million in a second case that will be decided by this ruling.
Jim Harra, HMRC Director General, Business Tax, said:
HMRC has again protected a significant amount of tax revenue, and we will continue to tackle aggressive tax avoidance schemes.
This win shows that any business, irrespective of size, that promotes or uses tax avoidance schemes can expect to be challenged by HMRC. Where necessary, we will take them through the courts to protect tax revenue.
This is the latest in a series of tax tribunal wins for HMRC, with tribunals finding in HMRC’s favour in around 80 per cent of avoidance cases that taxpayers choose to litigate.
Notes to editors
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The First-tier Tribunal decision is available here.
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This is the second win for HMRC against ANTS in recent weeks. The earlier decision can be read here.
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The avoidance scheme, used by Abbey National Treasury Services PLC (ANTS) (now part of the Santander banking group), involved distributing profits from ‘swaps’ to its parent company (Abbey National Plc), using accounting practice to claim an accounting debit as a tax deductible loss in ANTS without a matching taxable receipt in Abbey National Plc.
The scheme involved the issue of shares by ANTS to Abbey National Plc. The shares had specific rights that entitled Abbey National Plc to receive dividends of an amount equal to certain cash flows receivable from specified derivative assets (swaps), held by ANTS.
On issuing the shares, ANTS derecognised £160 million from the accounting value of the relevant swaps and recognised a corresponding £160m dividends debit, which it claimed as a tax deductible loss in its corporation tax return. The dividends were not taxable income in the hands of Abbey National Plc. HMRC agreed the accounting treatment but disagreed that the debit fairly represented a loss. This was supported by the First-tier Tribunal.
The Tribunal found that no deduction was due as ANTS had not incurred any loss to which the relevant legislation applied. The Tribunal also supported HMRC’s secondary transfer pricing argument.