The city's top banker was involved in an alleged tax evasion scheme.

A top Morgan Stanley banker was involved in an alleged tax evasion scheme at the center of a Supreme Court battle.

Simon Smith, co-head of investment banking at Morgan Stanley, is listed as a member of Cobalt Data Center 2, which is being challenged by HMRC over its generous tax benefits.

The scheme was developed. intends to provide investors with large tax breaks in return for investing in disadvantaged areas of the country.

Although not illegal, HMRC disputes whether the scheme qualifies for tax relief.

HMRC says no tax benefits should be passed back to Cobalt Data Center 2 backers. The scheme is fighting for the full benefit.

There was a two-day Supreme Court hearing at the end of January, with a decision expected later this year.

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Mr Smith is listed as a member of Cobalt Data Center 2 LLP at Companies House.

The former Rolls Royce engineer had been with the bank since 1998 and became one of the bank's leading transaction specialists.

He was involved in a legal spat between Morgan Stanley and Mike Ashley's Frasers group over the retailer's attempt to open a prime brokerage account with the bank.

Simon Smith is listed as a member of Cobalt Data Center 2 LLP at Companies House

Smith is among hundreds of celebrities and sporting names linked to the scheme, including Wayne Rooney and Arsene Wenger. The scheme also includes three High Court judges.

The Cobalt Data Center 2 fund is linked to the government's landmark plan to boost investment in deprived areas in return for generous tax breaks.

Cobalt Data Center 2 won the contract to build data centers in Newcastle by granting so-called permits on the Enterprise Zone (EZA) to hundreds of investors in the scheme.

Investors in the scheme put up £79 million, around one-third of the construction costs, but received back 100% of the £131 tax benefit million pounds sterling.

However, HMRC rejected the application for benefits, sparking a legal fight with Cobalt Data Center 2.

In 2019, the Upper Tribunal ruled against HMRC but halved the amount EZA that investors could receive.

The case has now gone to the Supreme Court, where HMRC is fighting to block the permits and Cobalt Data Center 2 is seeking full EZA reimbursement.

Smith has been contacted for comment. Morgan Stanley declined to comment.