Bank of Ireland fails to overturn €33m British tax bill
Published 21/02/2014 | 02:30
BANK of Ireland has lost a second attempt to have a £27m (€33m) British tax bill overturned.
The partially state-owned Irish bank must pay the tax on a £91m profit linked to its Bristol & West subsidiary in the UK, following the decision.
Yesterday, Her Majesty's Revenue and Customs (HMRC) in the UK described the bank's attempt to use a loophole in the law governing the taxation of derivatives as a "highly complex and speculative avoidance gamble".
That was after the UK's Upper Tribunal rejected the bank's second appeal against the tax bill, following a similar decision last April.
The decision followed a two- day hearing in London, presided over by Mr Justice Peter Smith earlier this month.
British tax authorities previously criticised the Irish bank for what was described as "a flawed attempt to exploit what it thought was a loophole" in the UK tax system.
The bank had argued that it was not liable for the tax because the original swap held by Bristol & West had been cancelled and replaced by a new one.
The case itself dates back to 2003. It arose out of Bank of Ireland's transfer of a "swap contract" between its Bristol & West unit and another Bank of Ireland subsidiary.
A "swap" is a contract used by banks and business to manage the risks on investments. In this case the contract netted the bank a £91m profit, resulting in the tax liability.
"HMRC has shown that, no matter how complex or intricate the case is, it will not hesitate to litigate when the rules are being abused," HMRC said in a statement.