Local council uses tax avoidance scheme to finance upgrade of its offices – potentially costing the Treasury £3.6million
A local authority has used a tax avoidance scheme to finance the upgrade of its offices.
Clackmannanshire Council in central Scotland, jointly run by the SNP and Labour, saved £2.8million on the work, but the ruse may have cost the Treasury £3.6million in lost income tax receipts.
The scheme used a tax allowance called Business Premises Renovation Allowance, the general abuse of which the taxman is investigating. Investors put £2.8million into a partnership, which the council lent £4.9million, and the total was put into refurbishing the offices in Alloa, north-west of Edinburgh.
Investors could use the reliefs to set the £7.7million of upgrade costs against their tax bills, possibly saving them £3.6million. Investors had to declare the investment as a tax avoidance scheme.
It is not known if the Revenue is looking at this case, but it is targeting schemes using ‘circular’ loans. Here, the council has given the partnership short-term ownership of its HQ, which it then rents back. The interest owed by the partnership on the council’s loan is met by the council’s rental payments.
