One case marks HMRC’s ninth recent win against schemes promoted by NT Advisors. This scheme, which had 420 users, sought to create artificial losses by using a combination of the employment income and capital gains tax rules on share options.  In this case, the judge dismissed the case in open court, although the final judgment is not yet available.

The UT has also dismissed two other cases which were joined together because of similarities between the schemes involved. [Malcolm Healey and the Commissioners for Her Majesty’s Revenue and Customs, Appeal number: FTC/64/2013; and Philip Savva, Andrew Savva, Mario Savva,Savva Savva, Kalliopi Pericleous and the Commissioners for Her Majesty's Revenue and Customs, Appeal number: FTC/84/2013].

These two linked cases involved  bespoke schemes designed by banks to provide the users with a much higher tax-free return on their cash deposits than they could have obtained by placing funds in a normal deposit account.

The UT heard that broadly speaking, this objective was planned to be achieved by stripping interest coupons for the requisite period from a high-grade fixed- or floating-rate bond bought in the market by the bank. The bank would then sell the bond, stripped of the relevant coupons, to the taxpayer at an appropriately discounted price; the taxpayer would hold the bond until the end of the stripped period; and the bond would then be sold on the market for its full undiscounted value.

The hope was that the profit thus realised by the taxpayer would be a profit of a capital (not an  income) nature, that it would not be liable to income tax (whether as a discount, or otherwise), and that it would be exempt from capital gains tax as a gain on the disposal of a qualifying corporate bond.

The schemes were marketed by Kleinwort Benson Private Bank in the case of Healey, and by UBS Wealth Management, a financial services armof UBS, in the case of the Savva family in the early years of the present century, before the enactment of legislation which would on any view have charged the relevant profits to income tax.

David Gauke, financial secretary to the Treasury, said: ‘The overwhelming majority of people pay the taxes they owe. These latest cases show that HMRC will effectively tackle those who try to get around their legal responsibilities. Users of avoidance schemes should think twice before trying to abuse tax reliefs to avoid paying their fair share of tax.’

The Savva v HMRC ruling is available here  Savva v HMRC signed decision .pdf

The Healey v HMRC ruling is available here  Healey v HMRC signed decision.pdf

The NT Advisors decision has not been published yet.