HMRC triumphs in tax avoidance case

HMRC is claiming victory at an Upper Tribunal in a legal challenge involving two businesses which issued loan notes as bonuses as a form of tax avoidance – Cyclops Electronics and Graceland Fixing.

This scheme was formulated and implemented in the 2003-2004 and 2004-2005 tax years, and was initially designed and promoted by Haines Watts.

It was devised to work around the anti-avoidance legislation introduced to the employment income share schemes legislation at part 7 ITEPA 2003 by schedule 22 FA 2003. The legislation has now been amended.