HM Revenue and Customs (HMRC) announced today that it had won a tax avoidance case worth £54m against Ladbrokes.
The ruling at the first-tier tribunal prevents the bookmakers from reclaiming £54m in tax, and the tax authority has said it has another three similar cases in the pipeline worth £112m.
“Avoidance just doesn’t pay – we win around 80 per cent of cases taxpayers choose to litigate and many more concede before litigation,” said Jim Harra, director general of business tax at HMRC. “We will uncover the avoidance schemes and contrived structures designed to minimise tax and we will challenge them.”
Ladbrokes used a tax avoidance scheme, which was promoted by big four accountancy firm Deloitte, to exploit a loophole in the law that saw two companies in the bookie's group enter arrangements which manufactured a drop in the value of shares in one company so that a tax loss could be created in the other. No real economic losses were generated by the group as a result of the transaction.
HMRC said that this type of scheme, which exploited a gap in the law that existed in 2008 but was closed the same year, had 11 users in total, of which seven conceded and coughed up the tax owed before their case reached a tribunal hearing.
A Ladbrokes spokesperson said: “We believed we had a strong argument in this case. We're now considering our options with regards to a possible appeal.”
Deloitte has declined to comment.
Ladbrokes currently has plans to merge rival Gala Coral, which received backing from shareholders last week but still needs approval from the Competition and Markets Authority.