HMRC bans £77m Matrix tax avoidance scheme

HMRC Letter 480

HM Revenue & Customs has successfully banned a £77m tax avoidance scheme in court.

The Matrix Securities scheme operated through a Jersey-registered limited partnership claiming it was trading in the UK. The partnership focused on creating and exploiting intellectual property from medical research into vaccines targeting diseases such as HIV, flu and hepatitis B.

Some 83 investors in the partnership used £28m of their own cash and £86m in bank loans. The partnership claimed a first-year trading loss of nearly £193m, creating £77m in tax relief. This would have given them an almost £50m return on their personal investments.

HMRC specialist investigators discovered only £14m had been spent on research and development into vaccines. As a result, a tribunal agreed that individual partners were entitled to tax relief on no more than £14m of the losses.

The tribunal also found £7m in fees paid to a subsidiary of the scheme promoters failed to qualify for tax relief. Interest relief on the loans that had been used in the scheme was also restricted.

Exchequer secretary David Gauke says: “The Government is committed to tackling tax avoidance and will close down those schemes that are artificial and contrived ways of exploiting the rules, as Parliament intended.”

HMRC director general for business tax Jim Harra says: “Anyone tempted should be warned that these schemes carry a serious risk that you will end up paying the tax and interest on top of a set-up charge, which can run into the hundreds of thousands of pounds.

“This was a complex case but it shows once again how HMRC has the resources and technical expertise to effectively challenge tax avoidance.”

Yesterday, HMRC revealed it is doubling the number of staff in its affluent compliance unit to tackle wealthy tax avoiders.