Tax Avoidance Case, HMRC Tax Investigations

Clothing giant Next has lost a £22.4m legal battle with HMRC over its use of a tax avoidance scheme.

The Tribunal ruled in HMRC’s favour after finding that the structure, known as a ‘rate-booster’, was set out to artificially transfer money around the group to inflate the value of tax relief it was owed on overseas profits.

Rate-Booster schemes, which involve moving funds from one company to another in order to claim credit for tax paid on money made overseas, were used by some businesses to allow them to claim tax relief and reduce their corporation tax bill.

However, legal changes in 2005 and 2009 mean that rate-booster schemes are no longer possible or attractive for businesses, and around 70 rate-boosters have been conceded by companies, bringing in more than £500m in tax.

HMRC’s director general of business tax, Jim Harra, said: “This case shows how HMRC takes effective action against big businesses that try to avoid paying tax through convoluted, artificial avoidance schemes. HMRC expects all businesses to steer well clear of such schemes”.

HMRC are increasingly taking action against corporate tax avoidance by confronting businesses who they believe are involved in tax avoidance schemes.

If you are involved in a tax avoidance scheme and suspect that you may fall under investigation by HMRC, it is essential that you seek expert advice from a tax investigations professional in order to clarify your tax position.

For more information or to speak to one of our experience tax investigations professionals call us on 0113 387 5670 or fill out an Enquiry Form and we will contact you straight away.