Ladbrokes Back in Court Over £71 Million Tax Debt

Ladbrokes is taking on HMRC once again after its tax avoidance case was granted a hearing at the Court of Appeal.

Ladbrokes Court of Appeal.

Ladbrokes’ legal team will appear at the Court of Appeal in an effort to overturn a £71 million tax liability. (Image: leighday.co.uk)

Prior to its 2016 merger with Coral, Ladbrokes found itself in hot water with the UK’s tax authority because of a scheme devised by accounting firm Deloitte.

When the initial case went to tribunal in 2015, judges ruled that Ladbrokes’ bid to exploit a 2008 legal loophole (which was closed months later) wasn’t legal.

In February 2017, the gaming firm was back in court to hear that a group of judges had agreed with the initial decision that anti-avoidance rules meant it was liable for £71 million in tax payments.

Ladbrokes Continues to Fight

Unhappy with this second decision, Ladbrokes legal team pushed for a fresh appeal in March. After deliberation, Ladbrokes confirmed on October 19 that it had been granted an appeal and will now look to convince Court of Appeal judges that it had a legitimate tax liability.

The crux of the case centres on a weakness in a law regarding the taxation of loans to a third-party. With companies essentially able to offset their tax liability by loaning money to a separate entity which then suffers a loss in value, Ladbrokes used the system to relieve some of its corporate tax burden.

In practice, the Ladbrokes group set up two companies. As detailed in reports, Ladbrokes International and Travel Document Service were classed as a single entity for tax purposes in accordance with the 2008 loophole.

An artificial fall in the value of shares in one company was then designed to generate a loss for the other company and, therefore, relieve the Ladbrokes group of any tax liabilities. In reality, Ladbrokes suffered no overall loss and this is what HMRC based its case on.

Odds Against a Ladbrokes Win

Ladbrokes’ lawyers now need to convince judges that the company’s operational set-up described fell outside of HMRC’s anti-tax avoidance rules. If the company is unsuccessful for a third time, it may have one final point of legal recourse through the Supreme Court.

However, with HMRC suggesting that it has an 80 percent success rate in cases such as this and nine of the 11 companies originally caught already conceding, the odds are against Ladbrokes at this point.

Share Now: