Accountancy and tax consultancy PricewaterhouseCoopers has lost a £1 billion tax management case designed to help 200 wealthy investors save £90 million.
The Court of Appeal has upheld an Upper Tier Tribunal ruling against scheme member Howard Schofield, who wanted to avoid capital gains tax on selling shares worth £10 million.
HM Revenue & Customs (HMRC) argued the ‘artificial’ scheme applied self-cancelling option agreements to return shares to the seller in a way that created an allowable loss.
As separate transaction, the share sales comprised exempt gains and allowable losses, but viewed as a composite transaction, they did not.
The Court of Appeal rejected Schofield’s appeal against the decisions by the First Tier and Upper Tier Tribunals that he made a composite transaction when he sold his shares within the scheme.
Schofield was also denied leave to appeal to the Supreme Court.
The Court of Appeal court decision was unanimous and the judges warned investors that similar schemes do not work in law.
HMRC claims investors would have saved around £90 million of tax by generating £1 billion of losses, with an actual loss of around £11 million.
The 200 investors now face action by HMRC to recover lost tax, interest and penalties.
Exchequer secretary David Gauke said: “This is a great result for the country and it’s another example of HMRC taking firm action against the avoidance schemes that would otherwise deprive the UK of billions of pounds.
“When millions of hardworking families are playing by the rules, paying what they have to, we will not put up with the use of cleverly structured schemes designed purely to get around the rules.”
PwC has made no comment about the court case.
