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.
The avoidance scheme, used by Abbey National Treasury Services, 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.
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.
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.
"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."
