An HM Revenues & Customs investigation found that Land Securities sold shares in one of its group companies to a Cayman Island subsidiary of investment bank Morgan Stanley, which then inflated the value of the shares by pumping money into the subsidiary.
Land Securities bought back the shares at the inflated price, claiming that the effect of an existing anti-avoidance rule was that they had made a “loss” of £200m that could be used as a deduction against tax.
The company claimed, in tribunal, that disallowing the loss would not be fair as it would be out of pocket if it sold the shares in the future. The tribunal disallowed the loss.
Land Securities is the UK's largest commercial property company.
HMRC director general for business tax Jim Harra said: “This scheme was flagrant tax avoidance that provided finance to a FTSE 100 company that appeared cheap because the UK taxpayer was expected to pick up a £60m bill.
The government welcomed the court ruling. Exchequer secretary David Gauke said: “At a time when we must all pay our fair share, it is increasingly unacceptable for individuals and businesses to try to avoid or evade paying their taxes.
“HMRC has a strong set of weapons to tackle tax avoidance and the outcome of this case and the ruling should send a clear signal to the minority engaged in avoidance activities – the net is closing in.”
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