A Bank of Ireland subsidiary, Bristol & West (B&W), located in the UK, has lost its appeal in UK courts in a tax avoidance case that involved its novation of a portfolio of “in the money” interest-rate swaps to another group company, Bank of Ireland Business Finance Limited (BIBF), for a premium of £91 million.
The case, decided by the Court of Appeal on April 27, involved contracts transferred from B&W under previous UK tax legislation and received by BIBF under a new UK tax regime. Though B&W acknowledged that taking advantage of the different laws avoided tax, the company argued that transaction technically fit within the terms of the statutes and thus should be respected.
The Court of Appeal case dismissed the case, though, disagreeing with B&W’s reading of the statute. B&W said it will pursue no further appeals.
“This was a cynical attempt to exploit a non-existent loophole to avoid paying tax. It has failed,” James Harra, HM Revenue & Customs’ Director of General Businesses Tax said May 10, announcing the win.
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