Bank of Ireland loses £27m tax avoidance case
Bank of Ireland has lost a £27m tax avoidance case in the UK after an attempt to exploit a loophole that did not exist.
HM Revenue and Customs (HMRC) challenged the attempt to avoid Corporation Tax by the bank through a subsidiary, the former building society Bristol and West, and the Court of Appeal has ruled HMRC was right.
An additional £5.9m is at stake in another case while the other five users of the scheme conceded before the legal action began, paying £215m in tax.
The avoidance scheme sought to exploit the move from one piece of legislation to another. Contracts were moved from Bank of Ireland subsidiary under the old legislation but were received by a second subsidiary under new legislation.
All parties agreed the transfer of the contracts was done solely to avoid tax but they argued the scheme worked because the move from one piece of legislation to the other created a loophole.
HMRC’s Director General of Business Tax, Jim Harra, said: "This was a cynical attempt to exploit a non-existent loophole to avoid paying tax. It has failed.
"We will continue to investigate and pursue those who try to avoid paying their fair share on behalf of the majority who play by the rules, and pay the tax they owe."
Bank of Ireland said the ruling conclusive and it would not pursue any further appeals.
The bank said in a statement: "The group will not be pursuing a further appeal and is satisfied that the acknowledged legislative and procedural uncertainties have now been clarified.
"The group notes this is an issue that dates back some 12 years and that the tax assessed has already been paid. The group have signed up to the Code of Practice on Taxation of Banks and is fully compliant with its obligations under the code."
Bank of Ireland’s UK operation is subsidiary of the Bank of Ireland Group with around 2,200 employees.