HM Revenue & Customs has won a GBP60 million court battle over a tax avoidance scheme involving US investment bank Morgan Stanley and FTSE 100 company, Land Securities.
Land Securities sold shares in one of its group companies to a Cayman Island subsidiary of Morgan Stanley, and later the lender inflated the value of the shares by pumping money into the subsidiary.
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HMRC said Land Securities bought back the shares at the inflated price, claiming the effect of an existing anti-avoidance rule was that they had made a "loss" of GBP200million which could be used as a deduction against tax.
In the tribunal, Land Securities claimed disallowing the loss would not be fair as it would lose out if it sold the shares in the future. The tribunal disallowed the loss.
Treasury exchequer secretary David Gauke said: "At a time when we must all pay our fair share, it is increasingly unacceptable for individuals and businesses to try to avoid or evade paying their taxes.
Jim Harra, HMRC’s director general for business tax, said, "This scheme was flagrant tax avoidance that provided finance to a FTSE 100 company that appeared cheap because the UK taxpayer was expected to pick up a GBP60 million bill.
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By GlobalData
