Bank of Ireland loses £27m tax avoidance case in UK

Bank of Ireland has lost a £27m (€34.2m) tax avoidance case in the UK after an attempt to exploit a loophole that did not exist.

HM Revenue and Customs challenged the attempt to avoid corporation tax by Bank of Ireland through a subsidiary, the former building society Bristol and West, and the Court of Appeal in the UK has ruled in favour of HMRC.

An additional £5.9m is at stake in another case, while the other five users of the scheme conceded before the legal action began, paying £215m in tax.

The avoidance scheme was aimed at exploiting a move from one piece of legislation to another.

Contracts were moved from the Bank of Ireland subsidiary under the old legislation but were received by a second subsidiary under the new legislation.

All parties agreed the transfer of the contracts was done solely to avoid tax but they argued the scheme worked because the move from one piece of legislation to the other created a loophole.

Commenting on the case, HMRC’s Director General of Business Tax Jim Harra said: “This was a cynical attempt to exploit a non-existent loophole to avoid paying tax. It has failed.

“We will continue to investigate and pursue those who try to avoid paying their fair share on behalf of the majority who play by the rules, and pay the tax they owe,” he added.

In a statement, Bank of Ireland Group said it has received a copy of the judgment and “considers that the decision is conclusive and definitive”.

It added: “The Group will not be pursuing a further appeal and is satisfied that the acknowledged legislative and procedural uncertainties have now been clarified.

“The Group notes this is an issue that dates back some 12 years and that the tax assessed has already been paid.

“The Group have signed up to the Code of Practice on Taxation of Banks and is fully compliant with its obligations under the Code.”

Bank of Ireland’s UK operation is a separately incorporated subsidiary of the Bank of Ireland Group with around 2,200 employees.