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Jersey-registered partnership claimed £77m in relief
HMRC have won a legal battle to shut down an avoidance scheme that abused tax rules designed to aid medical research. The victory has protected almost £80m, said the department.
The arrangement was promoted by Matrix Securities Ltd and operated through a Jersey-registered limited partnership that claimed to be trading in the UK.
It focused on creating and exploiting intellectual property from research and development (R&D) of vaccines for diseases including HIV, flu and hepatitis B. Eighty-three investors put in a total of £114m comprised of their own cash and bank loans.
The partnership claimed a first-year trading loss of nearly £193m, creating £77m in tax relief. Revenue investigators discovered that only £14m had been spent on medical R&D.
As a result, a tax tribunal agreed that the individual partners were entitled to relief of no more than £14m of the losses.
The tribunal further decided that £7m in fees, which the partnership paid to a subsidiary of the scheme promoters, failed to qualify for tax relief. Interest relief was restricted on the loans that had been used in the scheme.
HMRC’s director general for business tax, Jim Harra, hailed “another important victory” for the department.
He added, “This was a complex case but it shows – once again – how the Revenue has the resources and technical expertise to effectively challenge tax avoidance.”
