Stagecoach: £11m tax treatment ruling

HMRC has stopped what it described as a tax avoidance scheme used by Stagecoach to cut its tax bill by £11m. The scheme involved moving money between companies in the Stagecoach Group in an attempt to create a large loss in one company. However there was no equivalent gain in the other companies. According to the HMRC, the scheme was intended to artificially reduce Stagecoach’s Corporation Tax bill in the accounting period ending 30 April 2011.
The First-tier Tribunal ruled the scheme did not work, agreeing with all of HMRC’s legal challenges. It ruled there was no loss for Stagecoach for tax purposes and therefore the scheme did not work so there could be no reduction in their Corporation Tax bill. The historic tax involved in this case has already been paid. In addition, Stagecoach paid over £30m in UK Corporation Tax in the last financial period. It expects to pay over £35m in Corporation Tax in 2015-16.

A Stagecoach Group spokesman said, ‘we believe it is right that we pay our fair share of taxes and we are committed to doing so. The case involved the interpretation of historical and technical issues which are no longer relevant under current legislation, and no additional tax is payable by Stagecoach as a result of the ruling.’

‘These historic transactions involved Stagecoach investment in its subsidiaries, and the First-tier Tribunal ruling did not challenge the commercial background behind those transactions. The Tribunal did not, however, agree with the tax treatment Stagecoach had adopted and we will take time to consider the findings of the Tribunal before deciding on the way forward. Regardless of the outcome, the case does not impact our expectation of profit or our effective tax rate.’

Financial Secretary to the Treasury, David Gauke, said, ‘This is a significant victory and should serve as a warning to those tempted by tax avoidance, it simply does not work. We have put in place the lowest rate of Corporation Tax in the G7 but we are absolutely clear that every penny of it will be paid.’

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