Betting agents Ladbrokes used the scheme promoted by Deloitte in 2008 to minimise its corporation tax bill by exploiting a legal loophole which has since been closed.
The scheme involved two companies in the Ladbrokes group (Ladbrokes International and Travel Document Service) entering into purposely-designed arrangements so that an artificially manufactured fall in the value of the shares in one of the companies generated a loss for the other company for tax purposes. The group suffered no real loss overall, HMRC said.
Ladbrokes conceded that the arrangements were intended to avoid tax but argued in court that anti-avoidance rules did not catch them out.
However, HMRC disagreed and the tax authority won the case in court for a second time.
The First-Tier Tribunal first ruled in HMRC’s favour in 2015 but the high street bookie appealed the ruling.
HMRC’s director general for customer compliance, Jennie Granger, said, “Ladbrokes would have been better off just paying the tax but instead they pursued this lengthy legal dispute with HMRC.
“Avoidance schemes like this just don’t work and HMRC will always take firm action against them. The bookie gambled and lost when the odds of success could not have been lower.”
There were originally 11 users of this type of scheme. Nine have now conceded before the Tribunal hearing and paid the tax owed.