A Bank of Ireland attempt to avoid paying a £30m corporation tax bill has been quashed by HM Revenue & Customs.
The bank's subsidiary, Bristol & West, tried to avoid paying tax on a £91m gain. It attempted to exploit what it thought was a loophole in the tax rules by transferring a swap contract to another Bank of Ireland subsidiary.
The dodge was based on the flawed theory that the £30m tax due would disappear on the cancellation of the original contract and its replacement with a new one. That was because one of the companies involved in the swap was within a new tax regime while the other was not.
The theory was based on exploiting a perceived weakness in rules on the taxation of swaps in Finance Act 2002.
But HMRC fought the bank and took it to court over the issue where a tribunal judge ruled that there is in fact no loophole to exploit. Exchequer Secretary, David Gauke, said: "The vast majority of businesses and individuals pay the tax they owe. HMRC will challenge avoidance schemes that risk denying the Exchequer vital tax revenues and will pursue to litigation when necessary."
The Bank of Ireland refused to make any comment on its failed attempt to avoid paying £30m tax in the UK.
The latest case sends out a warning to big firms that use tax avoidance schemes. Six corporate tax loopholes were closed in the most recent Budget, according to HMRC.Reuse content