Appeal loss sees Ladbrokes hit with £70 million HMRC tax charge

UK business news sources have reported this weekend, that bookmaker Ladbrokes has been hit with a £70 million tax charge relating to an overturned UK Revenue & Customs (HMRC) ‘2008 tax avoidance’ scheme.

The UK Tax Tribunal stated that Ladbrokes Group and its auditor Deloitte knowingly exploited a 2008 tax loophole relating to loans between corporations and third parties to minimise Ladbrokes full-year tax bill.

Auditor Deloitte had set up an arrangement between group subsidiaries ‘Ladbrokes International’ and ‘Travel Document Services’, in which ‘an artificially manufactured fall in the value of shares in one company would be used to create a loss in the other company for tax purposes’.

HMRC governance states that during the fiscal period, Ladbrokes Group suffered no actual losses and used the loophole to avoid paying corporate taxes. UK Customs officials, further detailed that nine corporations using the same type of scheme had conceded to the Tribunal and paid the taxes owed.

Ladbrokes conceded that the arrangements were intended to avoid tax but argued in court that anti-avoidance rules did not catch them out – HMRC disagreed. Making its ruling in favour of HMRC, the Tax Tribunal rejected all of Ladbrokes arguments further stating “the essence of the scheme was to exploit a perceived loophole in the code for taxation of loan relationships.”

Jennie Granger, Director General of Compliance at HMRC, criticised Ladbrokes for taking its appeal to court, stating that the bookmaker would have been ‘better off just paying the taxes’.

She said: “Ladbrokes would have been better off just paying the tax but instead they pursued this lengthy legal dispute with HMRC. Avoidance schemes like this just don’t work and HMRC will always take firm action against them. The bookie gambled and lost when the odds of success could not have been lower.”

Furthermore, its auditor Deloitte has been criticised by  UK MPs for clearly advising its clients to avoid paying tax by implementing the complex avoidance scheme.

This weekend Ladbrokes governance stated that it was aware of the Tribunal judgement and that the company would now move to consider its options.