Her Majesty’s Revenue and Customs has emerged victorious against a major tax avoidance scheme  perpetrated by a consulting firm, resulting in some £400 million.
A tax tribunal was decided in the taxman’s favour recently as its struggle against Consulting Overseas Limited and it’s ill-thought out scheme to instruct contract workers to pose as employees of Sandfield Consultants, a company based in the Isle of Man. The contractors then received around 66 per cent of their earnings as loans in foreign currency which they then traded, transforming their earnings into capital gains in the foreign exchange markets – gains which are non-taxable.
After quickly perusing the particulars of the case, the tribunal more or less dismissed any and all arguments against the assessments of the HMRC. The elaborate structure of the tax avoidance scheme were criticised as ‘entirely artificial’ by the tribunal judge, and now all the money that would have prior been not subjected to taxation will now be – and that means the possibility of an additional £400 million making its way into the Treasury’s coffers.
I have to say I’m pretty impressed with this scheme. I mean let’s be honest here: for what it’s worth, this is a pretty complex bit of financial gerrymandering. The foreign currency exchange is a nice touch, too – I especially liked that added layer of complexity. Still, it’s absolutely gratifying to see such an intricate plan get flayed alive. The unraveling of the plan gives one the sense of watching a train wreck in slow motion – something you just can’t turn away from. Plus, that £400 million is a nice bit of cash to reclaim from the pockets of less-than reputable contractors who thought they could get a number over on all of us, not just the tax authority.
See, this is more of the kind of action that needs to be undertaken by the taxman, instead of wasting time on other measures. Here’s hoping there’s more where that came from.