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HMRC Welcomes Victory In Tax Avoidance Court Case

by Robert Lee, Tax-News.com, London

22 November 2012


The UK tax authority, HM Revenue and Customs (HMRC) has mounted a successful legal challenge to a marketed tax avoidance scheme that it says has resulted in the protection of up to GBP109.6bn (USD174bn) in revenue.

The original scheme involved the assignment by various trading subsidiaries of the Iliffe News and Media group of unregistered trade marks (mastheads) to the parent company, which were then licensed back for a fixed term in return for a lump sum payment.

According to HMRC, the group claimed that the lump sum fees in the hands of the licensor were within the capital gains regime. Therefore, the group argued, it was entitled to claim deductions on the payments. In addition, the trading subsidiaries claimed that the grant of the licence was a new intangible fixed asset enabling them to claim tax relief on the payments.

UK legislation was amended in December 2005 to prevent this type of scheme operating. A tribunal has now ruled that subsidiaries of Iliffe News and Media Limited were not entitled to a tax deduction for payments they had made to their parent company to use their own mastheads.

HMRC says that the decision has protected GBP5.6m and potentially GBP104m in 67 similar cases.

Jim Harra, HMRC’s Director General for Business Tax, welcomed the outcome: “This is an important ruling against a marketed avoidance scheme and the latest in a series of successful HMRC challenges to such schemes. We will continue to challenge artificial arrangements such as this in the interests of the vast majority of businesses and people who choose to play by the rules.”

TAGS: court | compliance | tax | business | tax compliance | tax avoidance | law | United Kingdom | enforcement | legislation | HM Revenue and Customs (HMRC) | HM Revenue and Customs (HMRC)

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