A multi-million pound tax avoidance scheme, designed to abuse rules set up to encourage genuine medical research, has been successfully challenged in court by HMRC.

The taxman said its legal victory at the Upper Tribunal over the scheme, promoted by Matrix Securities Ltd, had "protected" around £80m.

HMRC said the case centred on a Jersey-registered limited partnership which claimed to be trading in the UK. The partnership focused on creating and exploiting intellectual property from research into vaccines targeting diseases such as HIV, flu and hepatitis B.

The partnership of 83 investors used £28m of their own cash and £86m in bank loans and claimed a first-year trading loss of nearly £193m, creating £77m in tax relief. This would have delivered a £50m return on their personal investments.

But HMRC investigators discovered that just £14m had been spent on research and development into vaccines. As a result, a tribunal agreed that individual partners were entitled to tax relief of no more than £14m of the losses.

The tribunal found that £7m in fees paid to a subsidiary also failed to qualify for tax relief. Interest relief on the loans that had been used in the scheme were also restricted. HMRC has since introduced further targeted anti-avoidance legislation to prevent similar schemes being set up.

Jim Harra, HMRC's director general for business tax, said: 'This is another important victory for HMRC as we continue to challenge artificial tax avoidance schemes. This type of marketed avoidance scheme is unfair to the vast majority of businesses and people who play by the rules.

'Anyone tempted should be warned that these schemes carry a serious risk that you'll end up paying the tax and interest on top of a set-up charge, which can run into the hundreds of thousands of pounds.

'This was a complex case but it shows - once again - how HMRC has the resources and technical expertise to effectively challenge tax avoidance.'