Next ordered to pay £22.4m after court rules it used tax avoidance scheme

High-street retailer Next has been slapped with a £22.4m (€31.2m, $35m) tax bill after a court ruled the firm had used an "artificial tax avoidance" scheme.

The company had been in dispute with HM Revenues and Customs over the use of a tax avoidance structure known as a rate-booster, which involves trying to avoid corporation tax on foreign profits.

In Next's case, the scheme was said to work by the company artificially moving money around the group and then attempting to claim tax relief on overseas profits.

Next had challenged the decision but the First-Tier Tribunal (FTT) ruled in HMRC's favour on 19 May.

HMRC's director general of business tax Jim Harra said: "This case shows how HMRC takes effective action against big businesses that try to avoid paying tax through convoluted, artificial avoidance schemes."

Harra also warned other big businesses to "steer well clear of such schemes".

Other multinational firms including Google, Starbucks and Amazon have all been accused of using tax avoidance schemes in the past.

It is not the first time this year that the retailer has courted controversy. Next's chief executive Lord Wolfson, who is worth an estimated £112m, was forced to apologise after criticising Living Wage campaigners in March. The Tory peer had claimed that £6.70-an-hour was "enough to live on".

A Next spokesperson said in a statement: "The disputed amount, as jointly agreed between HMRC and Next, was £22.4m. This case sought to reclaim tax which had already been paid by Next, tax that would not be payable under current legislation. The claim was for £22.4m - of the £1,316m of corporation tax that Next has paid over the last ten years - and it should be taken in that context."