Elaborate avoidance

The taxpayer company claimed double taxation relief of approximately £21m in respect of payments it received from related firms directly or indirectly on the basis the sums were dividends.

HMRC amended the business’s tax return to £7m reflecting the underlying tax that had actually been paid.

The company appealed saying the effect of TA 1988 s 801 was that the remaining £14m should be recognised as paid.

The First-tier Tribunal ruled there had to be a payment that could be properly characterised as a dividend for a double taxation relief claim to be effective and the claim had to relate to UK or overseas tax paid on the profits represented by the dividend.

The scheme in this instance had been devised purely to avoid tax. There were no profits on which tax was borne nor any payment that could realistically be classed as a...