HMRC Win £400m Case Against Tax Avoiders

Dec 11, 2013


By Lyndsey Hall

HMRC wins £400m case against tax avoiders


A case involving a scheme that was set up to help independent contractors avoid paying income tax and National Insurance contributions totalling £400m has been won by HMRC.

Philip Boyle, a contractor with Consulting Overseas Limited, appealed against the Revenue’s assessments regarding the scheme; however the arguments put forward by Boyle were dismissed at a First-Tier Tribunal.

In order to avoid tax and NI, Boyle and other contractors signed up as employees of an Isle of Man based company called Sandfield Consultants Ltd. These contractors agreed to receive around two thirds of their wages as loans in foreign currency, including Romanian lei, Byelorussian roubles and Uzbekistani soums. This income was then supposed to be transferred into non-taxable foreign exchange gains as a result of currency trades.

However, in the case of Philip Boyle, the judge found the loans to be “in substance and reality income from his employment, bearing in mind in particular that Mr Boyle had no need for a loan, there was an entirely artificial exchange rate… the reality is that there was no borrowing by Mr Boyle and he never believed that the ‘loans’ were other than a means of receiving his income without suffering tax on that income.”

Regarding the loans, the judge also found them to be completely falsified: “No evidence has been provided at any stage during HMRC’s lengthy investigation of the scheme, despite requests for such evidence, to show that the foreign currency ever existed.”

Similar schemes have also been discovered, revealing around 15,000 contractors who have received ‘loans’ as a form of payment. The scheme marketed by Consulting Overseas Ltd had a total of 348 subscribers, only 226 of whom have settled with HMRC and paid the tax due, which comes to almost £5m. HMRC is continuing to pursue the remaining contractors on the scheme.

The Exchequer secretary to the Treasury, David Gauke, has expressed his delight that the ‘contrived scheme, designed to avoid tax’ was thrown out at Tribunal:

“The unprecedented package of counter-avoidance measures announced in the Autumn Statement, combined with HMRC’s record of winning over 80 per cent of all avoidance cases taken to court, shows the writing is on the wall for the minority who are prepared to use marketed tax avoidance schemes to get around the rules.”


Let us know your thoughts on the Government’s latest counter-avoidance measures in the Comments.



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