P&O has failed in a bid to use a complex international tax avoidance scheme to avoid UK corporation tax.

The British shipping and logistics company aimed to get an extra £14 million in tax relief by artificially boosting the credit due for tax paid on dividend income.

But HM Revenue and Customs (HMRC) successfully challenged the scheme in the First Tier Tribunal, which ruled that the transactions were all part of an “elaborate trick” designed to exploit the rules.

The Tribunal ruled: “It is clear that the scheme would only work so long as every participant in it was either a captive company or a stooge employee of a company within the P&O group.” It also found that it was “designed and implemented for no reason other than tax avoidance.”

David Gauke, Exchequer Secretary to the Treasury, said:

“I’m delighted that HMRC has successfully defeated this attempt by a major company to artificially reduce its tax bill by exploiting an extremely complex international financial structure.

“The Government has made it very clear that we won’t put up with aggressive tax avoidance and we have resourced HMRC to take on even the most complex and convoluted schemes, as this Tribunal decision shows.”

In total, £154 million of tax was protected. The legislation being exploited by P&O was repealed in 2005 to prevent such practices.

The case is Peninsular & Oriental Steam Navigation Company v Commissioners for HM Revenue and Customs [2013] UKFTT 322 (TC). The decision is available here.