Source: HMRC 20 July 2017
HM Revenue and Customs has won a legal battle against a tax avoidance scheme, which claimed £122 million was spent on research into brain disorders, when only £7 million of it reached a genuine research company.
The win against Brain Disorders Research Limited Partnership protects taxes worth £29 million.
The organisation said the money was going to research into depression and Attention Deficit Hyperactivity Disorder (ADHD) but they claimed reliefs on artificial loans and large amounts of capital allowances.
The scheme, promoted by Matrix-Securities Ltd, was designed to create an impression the money was being used for research when, in fact, it sought to claim reliefs that were not due.
The scheme was set up to enable investors to make large claims for interest relief on their borrowings. The 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.
David Richardson, HMRC Director General for Customer Compliance, said:
“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.”
The case, heard at theUpper Tribunal, agreed with the previous decision from the First-tier Tribunal that part of the contract was ‘a sham’.
The appellants have applied to the Court of Appeal for permission to appeal the decision.
HMRC has an excellent record in tax avoidance cases, winning around 80% of cases taken to court.