The Bank of Ireland has lost a £27m tax avoidance case, after trying to exploit a loophole that did not exist.
HM Revenue & Customs challenged the attempt to avoid corporation tax by the Bank of Ireland through a subsidiary, Bristol & West, with the Court of Appeal ruling in favour of the government.
Another £5.9m is at stake in a follow-up case, while the other five users of the scheme conceded before the legal action began, paying £215m in tax.
The avoidance scheme sought to exploit the move from one piece of legislation to another.
Contracts were moved from Bank of Ireland subsidiary under the old legislation, but were received by a second subsidiary under the new legislation.
All parties agreed the transfer of the contracts was done solely to avoid tax, but they argued the scheme worked because the move from one piece of legislation to the other created a loophole.
HMRC’s director general of business tax Jim Harra called it a cynical attempt to exploit a non-existent loophole to avoid paying tax.
“We will continue to investigate and pursue those who try to avoid paying their fair share on behalf of the majority who play by the rules, and pay the tax they owe.”
The Bank of Ireland Group stated it considers the decision is conclusive and will not be pursuing a further appeal.
“The group notes this is an issue that dates back some 12 years and that the tax assessed has already been paid,” read a statement, adding since then it has signed up to the Code of Practice on Taxation of Banks and is fully compliant with its obligations.
Last week, Pinsent Masons warned that HMRC’s crackdown on tax avoidance is likely to be extended, after already netting the government an extra £494m worth of income tax in 2014 to 2015 through investigations into tax avoidance schemes, according to a Freedom of Information request by the law firm.
peter.walker@ft.com
