Friday, March 23, 2018

UK Court of Appeal Rejects Ladbrokes Appeal in HMRC Tax Battle

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UK Court of Appeal Rejects Ladbrokes Appeal in HMRC Tax Battle

The UK Court of Appeal rejected an appeal lodged by Ladbrokes in relation to the gambling operator’s decade-long £71-million tax avoidance battle with HM Revenue and Customs, City A.M. reports.

The dispute relates to a 2008 tax scheme deployed by Ladbrokes and accountancy firm Deloitte that exploited a legal loophole to avoid a higher corporate tax bill. The loophole was closed by the UK Government the same year.

Back then, Delloite advised several of its clients, Ladbrokes included, to establish “transacting subsidiaries” within their groups and to transfer corporate tax charges into these. The larger groups thus created just a single unit that was generating losses.

In Ladbrokes’ case, the high street bookmaker merged two of its companies – Travel Document Service and Ladbrokes International, into one subsidiary. The arrangement involved an “artificially manufactured fall in the value of shares” in one of the companies to create a loss in the other company for tax avoidance purposes. Ladbrokes was found to have not suffered actual economic loss following the move.

The dispute between Ladbrokes and HMRC began with the latter slamming the gambling operator for knowingly entering the arrangement and exploiting a loophole to renege tax duties. The UK Government department also pointed out that nine UK corporations that had deployed Deloitte’s scheme had conceded to have done wrong and had paid the tax owed, urging Ladbrokes to follow suit.

The operator admitted back then that it did aim to avoid taxes and it did not generate losses in 2008, but maintained that its set-up did not fall within the remit of HMRC’s rules against tax avoidance at the time.

The bookmaker eventually paid the amount of £71 million in taxes but later on sought to recoup the sum.

Tribunal Court’s Ruling

The UK Tribunal Court sided with HMRC last February, ruling that Ladbrokes had been well-aware of the fact that it had exploited a tax loophole to avoid tax burden. The bookmaker was later on allowed to appeal the Tribunal Court’s ruling in the UK Court of Appeal.

The UK’s second highest law court rejected the major gambling operator’s appeal and bid to rebate the amount of £71 million it had to pay in taxes.

News about Ladbrokes losing its tax appeal case came shortly after the Competition and Markets Authority cleared the operator’s proposed takeover by Isle of Man-based online gambling company GVC Holdings.

GVC is set to acquire Ladbrokes Coral for up to £4 billion to create one of the world’s largest gambling companies. The deal is expected to be completed by the end of this year’s first half. This would be the second consolidation move undertaken by Ladbrokes Coral in as many years. The Ladbrokes Coral group was created back in 2016 through the merger of Ladbrokes and Coral. The company currently operates the largest chain of betting shops across the UK.

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