BOI spent €1m fighting failed appeal over tax bill
Published 26/09/2016 | 02:30
Bank of Ireland spent over €1m on an unsuccessful legal appeal in the first six months of this year.
In April, the UK Court of Appeal ruled against the bank's efforts to overturn a disputed Stg£27m tax bill dating back to 2003.
The case centred on a tax avoidance scheme involving a UK subsidiary of Bank of Ireland, the former building society Bristol & West (B&W).
A recently published interim report for B&W - covering the six months to June 30, 2016 - states that "professional fees of £940,000 [€1.09m] associated with the dispute have been accrued in the period".
A portfolio of interest rate swaps - used by banks and business to hedge risk on investments - moved from B&W, under old legislation, and was received by another subsidiary, Bank of Ireland Business Finance Limited, under new legislation in August 2003.
This led to a £90m profit that should have attracted a £27m corporation tax bill, the British tax authorities HMRC said.
Bank of Ireland fought the case through a number of tax appeals courts, before accepting a UK Court of Appeal ruling in April that the tax should have been paid.
It said that having reviewed the judgment, it considered the court decision to be "conclusive and definitive."
"The Group will not be pursuing a further appeal and is satisfied that the acknowledged legislative and procedural uncertainties have now been clarified," the bank added.
"The Group notes this is an issue that dates back some 12 years and that the tax assessed has already been paid. The Group has signed up to the Code of Practice on Taxation of Banks and is fully compliant with its obligations under the Code," it said.
HMRC issued a statement after the ruling saying all parties agreed that the transfer of the swaps was done solely to avoid tax.
Bank of Ireland had argued the scheme worked because the move from one piece of legislation to the other created a loophole.
HMRC's director general of business tax, Jim Harra, labelled the scheme "a cynical attempt to exploit a non-existent loophole to avoid paying tax".
The B&W report states the £27m tax liability had already been paid to HMRC, so no extra tax or interest liability came about as a result of the court ruling.