28/02/2012

Barclays Bank Forced To Pay £500m In Tax

Rules around disclosing information to HM Revenue & Customs (HMRC) about possible tax avoidance schemes has forced Barclays banks to reveal two plans which HMRC have described as being ‘designed and intended to avoid substantial amounts of tax’.

The government has now closed the schemes and ordered Barclays to pay £500 million in taxes it was trying to avoid. It has also taken the unusual step of introducing retrospective legislation to end such "aggressive tax avoidance" by financial institutions.

Barclays have said they are surprised by HMRC’s reaction to the schemes that it believed to be ‘in line with those used by other banks.’

Britain’s big banks have all signed a code committing them not to engage in tax avoidance.

Exchequer Secretary to the Treasury David Gauke said the bank, which he did not name, should never have devised the schemes in the first place.

"The government is clear,” he said, “these are not transactions that a bank that has adopted the code should be undertaking.

The potential tax loss from this scheme and the history of previous abuse in this area mean that this is a circumstance where the decision to change the law with full retrospective effect is justified."

One of the schemes claimed that it should not have to pay corporation tax on profits made when buying back its own IOUs. The second involved investment funds claiming that non-taxable income entitled the funds to tax credits that could be reclaimed from HMRC, which has been described by the Treasury as "an attempt to secure 'repayment' from the Exchequer of tax that has not been paid".

It is thought that outlawing such tax dodges immediately could save the government a further £2bn.

Anyone, such as a bank, accountant, lawyer or tax adviser, who devises a seemingly legal tax avoidance plan, is obliged to tell the tax authorities about it within a few days of using it or marketing it to clients.

More than 2,000 schemes have been disclosed in the past eight years.

(H)






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