Tax  

HMRC victorious in 23 out of 24 tax avoidance court clashes

HMRC victorious in 23 out of 24 tax avoidance court clashes

HM Revenue & Customs won 23 out of 24 tax avoidance cases which went to court last year.

The tax authority has revealed that in 2017 to 2018 only one case was not won outright - and it was a mixed outcome, which meant it was partially in favour of HMRC and partially not.

HMRC also faced fewer tax avoidance litigation cases than the previous year, 2016 to 2017, when it ended up in court 26 times and won 22 cases.

A spokesman for HMRC said: "Think very carefully, and seek independent advice about entering into a scheme which claims to save you large amounts of tax.

"If it is too good to be true, then it probably is. HMRC will challenge them and you will be much worse off in the long run."

The only case HMRC did not win outright involved a tax planning scheme designed to create a capital loss that could be used to reduce the taxpayer’s taxable income.

The first tier tax tribunal held in HMRC's favour that the loss would not have been available to reduce taxable income because the underlying company did not meet the necessary trading requirements.

But it also held the taxpayer could appeal against HMRC's decision that the waiving of a loan he received was subject to income tax.

One of the cases HMRC won was the Root2 case, which could lead to the recovery of £110m of unpaid tax.

The victory came after the promoter failed to report a mass-marketed tax avoidance scheme, known as Alchemy, to HMRC.

The scheme aimed to extract profits from owner-managed companies in the form of winnings from betting on the stock market, which the scheme aimed to ensure would be tax free, rather than in the form of taxable employment income.

Another victory was the Clavis Liberty fund one case, which saw £18m of tax money paid to the taxman.

The scheme was promoted to high earners by Mercury Tax Group and sought to create artificial tax losses that were later claimed against scheme users’ other income to reduce their tax bills.

damian.fantato@ft.com