The United Kingdom tax authority, Her Majesty's Revenue and Customs (HMRC), accused General Electric (NYSE:GE) in a court filing of misleading the tax agency over a 2005 transaction the company made with an Australian subsidiary, according to a Bloomberg report. 

HMRC says that GE intentionally obscured the purpose of the Australian investment during tax settlement talks in 2005, calling its actions "deliberate" and saying GE provided "simplified" and "misleading" information, the report says. A finding against GE could cost the company $1 billion, according to British authorities. 

legal book with "tax law" in bold letters on an otherwise blank page

Image source: Getty Images.

The investment in question was reportedly an internal GE Capital refinancing operation, where GE moved as much as $4.9 billion among subsidiaries in the U.K., Australia, Luxembourg, and the United States. According to the report, HMRC attorney Philip Jones said in court that "This whole thing was set up as a tax scheme, to gain a tax advantage."

GE denies any misrepresentation of the transactions. It said the HMRC has referred the dispute to fraud investigators twice before, and there was no basis for an investigation found. 

In a note to its financial statements in GE's fourth-quarter 2018 quarterly filing, it said there was a potential impact of approximately $1 billion if tax authorities disallow deductions, but that it intended to contend any disallowance. "We comply with all applicable tax laws and judicial doctrines of the United Kingdom and believe that the entire benefit is more likely than not to be sustained on its technical merit," the company said.