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British bookmaker Ladbrokes has lost a long-running legal battle with HM Revenue and Customs (HMRC), costing the company GBP71m (USD88m).
In a statement on February 25, HMRC said Ladbrokes had used a tax avoidance scheme, promoted in 2008 by accountancy firm Deloitte, to minimize its corporation tax bill by exploiting a legal loophole, which has been closed.
HMRC said the scheme involved two companies in the Ladbrokes group – Ladbrokes International and Travel Document Service – entering into a purposely designed arrangement so that an "artificially manufactured" fall in the value of the shares in one of the companies generated a loss for the other company for tax purposes.
In court, Ladbrokes agreed that the arrangement had been intended to mitigate the company's tax liability but that the arrangement should not have been caught by anti-avoidance rules.
The First-Tier Tribunal ruled in favor of HMRC at a hearing on January 26, 2017, and the judgment was released on February 7, 2017, in Travel Document Services & Ladbroke Group International v. HMRC ( UKUT 0045 (TCC)).
HMRC said there were originally 11 users of this type of scheme. Nine have now conceded before a First-Tier Tribunal hearing and paid the tax owed.
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