LONDON Investment manager Aberdeen Asset Management (ADN.L) has lost a court battle over the closure of an offshore scheme it used to shield employees' bonuses from tax, as Britain cracks down on tax avoidance.
The Scottish Court of Session told Aberdeen to shut its Employee Benefit Trust (EBT), which saved senior staff 7 million pounds ($11 million) in income tax and National Insurance contributions due on 31 million pounds of bonuses paid between 2000 and 2003.
The decision ends several years of dispute between the asset manager and HM Revenue and Customs (HMRC) over the legitimacy of the scheme, which was banned in 2003.
Aberdeen is one of Britain's largest independent asset managers, with 202 billion pounds of assets at August 31, according to the company's web site.
HMRC had argued that Pay As You Earn (PAYE) tax and National Insurance should be paid on the bonuses, which were converted into shares under the complex trust.
A First Tier tax tribunal blocked the EBT in 2010, prompting Aberdeen to launch a successful appeal to overturn the ruling in the Upper Tribunal a year later.
In a subsequent appeal against that decision, three Scottish judges ruled last week in favor of HMRC and reinstated the 2010 decision.
"We are disappointed that the court's decision has gone against us, but we welcome the fact that we can now draw a line under this issue," an Aberdeen spokesman said on Monday.
"All amounts assessed by HMRC have previously been paid and the decision has no further financial impact on the group."
Exchequer Secretary to the Treasury David Gauke, who is the minister responsible for HMRC, said he hoped the court's decision would discourage other companies from using tax avoidance schemes.
"The government has made almost 1 billion pounds available to HMRC to tackle avoidance and evasion and to ensure that the minority who try to avoid their responsibilities pay the tax due," he said.
HMRC has so far recovered 671 million pounds from over 600 companies which have settled their liabilities using the EBT Settlement Opportunity launched in April 2011. ($1 = 0.6228 British pounds)
(Reporting by Sinead Cruise; Editing by Erica Billingham)