A car repairs tax avoidance scheme has been judged as a write-off by the courts, following a successful challenge of the £600m scheme by HMRC.

The scheme involved the restructuring of Oriel, which sold car warranties, so that VAT on car repair services could be recovered. Insurers cannot normally recover VAT on car repair work, because they do not have to charge VAT on the insurance premiums they receive.

HMRC refused to repay tax to WHA (a UK-based claims handling company) and Viscount Reinsurance (a Gibraltar-based reinsurance company) on the basis that the scheme was unlawful. The Supreme Court ruled unanimously against the scheme, which started in 1998 and therefore saves the Treasury from losing out as much as £600m per year in its total tax take.

Treasury secretary, David Gauke, said: 'HMRC's success in defeating this scheme sends a clear signal - the government will relentlessly pursue those that try to avoid their responsibilities, no matter how long it takes, and win.

'While most businesses and individuals pay the tax they owe on time, HMRC has received additional resources to make sure the minority are challenged when they attempt to avoid paying what is due.

WHA Limited and another (Appellants) v Her Majesty's Revenue and Customs (Respondent) [2013] UKSC 24