Tax tribunal strikes down QC’s own avoidance scheme


Tax: repercussions for other similar tax avoidance schemes

HM Revenue & Customs (HMRC) has warned that having a complex tax avoidance scheme approved by a senior lawyer does not render it safe after a specialist tax QC who designed his own scheme saw it struck down.

Rex Bretten QC, who retired last year from Tax Chambers, 15 Old Square, designed a highly complex scheme which involved setting up trusts and investing £500,000 in discounted securities. He claimed his scheme created a loss of £475,000 which he could set against his income, saving £190,000 in tax.

However, the tax chamber of the First-tier tribunal ([2013] UKFTT 189 (TC)) upheld an amendment made by HMRC to Mr Bretten’s self-assessment return, saying the securities had been issued solely to facilitate Mr Bretten’s tax avoidance scheme and that there was no genuine loss, so the tax was payable.

Although the structure was unique, the principles ruled on by the tribunal could be directly applied to a number of other cases involving further tax of around £2m.

The Exchequer Secretary to the Treasury, David Gauke, said: “The vast majority of individuals and businesses pay the tax they owe. There are, however, a small minority who will seek to exploit the rules and try to avoid their responsibilities by engaging in artificially contrived schemes.

“This is simply unacceptable and this case serves to highlight the work HMRC is doing to tackle evasion, avoidance and fraud. This government has invested over £1bn in HMRC and we are determined to ensure that the tax that is due under the law is collected.”

Jim Harra, HMRC’s director-general for business tax, said: “This is another important success for HMRC at tribunal which may well have repercussions for other similar tax avoidance schemes.

“Some people make the mistake of thinking that a complex avoidance scheme backed by a senior lawyer is safe from HMRC’s challenge. That would be a big mistake, as this outcome proves. People should always ask themselves whether a proposed scheme is too good to be true.”




Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Blog


Will solicitors finally be fans of transparency now?

Since the introduction of the SRA’s transparency rules in December 2018, I have been an advocate for law firms going further then the regulatory essentials.


A two-point plan to halve the size of the SRA

I have joked for many years that you could halve the size (and therefore cost) of the Solicitors Regulation Authority overnight by banning both client account and sole practitioners.


Key cyber and data security questions to ask a legal IT provider

One of the growing priorities that law firms face when considering a legal technology provider is cyber and data security, such as their responsibilities and cyber incident management.


Loading animation