Barclays Bank to pay £500m in back taxes for avoidance schemes

From the BBC

Barclays Bank has been ordered by the Treasury to pay half-a-billion pounds in tax which it had tried to avoid.

Barclays was accused by HM Revenue and Customs of designing and using two schemes that were intended to avoid substantial amounts of tax.
The government has taken the unusual step of introducing retrospective legislation to end such "aggressive tax avoidance" by financial institutions.
Tax rules forced the bank to tell the authorities about its plans.
The government has closed the schemes to retrieve £500m of lost tax and safeguard payments of billions of more tax in the future.
BBC business editor Robert Peston has been told by Barclays that it is surprised by HMRC's reaction to the two schemes, which it believed to be in line with those used by other banks.
Our business editor says it is highly embarrassing for Barclays, because Britain's big banks have all signed a code committing them not to engage in tax avoidance.
'Decision justified'
Announcing the crackdown, Exchequer Secretary to the Treasury, David Gauke, said the bank involved, which he did not name, should never have devised the schemes in the first place.All Britain's big banks have signed a code committing them not to engage in tax avoidance”

 

Robert Peston Business editor

 

"The bank that disclosed these schemes to HM Revenue & Customs (HMRC) has adopted the Banking Code of Practice on Taxation which contains a commitment not to engage in tax avoidance," he said.

"The government is clear that these are not transactions that a bank that has adopted the code should be undertaking.
"We do not take today's action lightly, but 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."
Disclosure window
One tax dodge involved Barclays claiming it should not have to pay corporation tax on profits made when buying back its own IOUs.
The second tax avoidance scheme, also designed by Barclays, involved investment funds claiming that non-taxable income entitled the funds to tax credits that could be reclaimed from HMRC.
The Treasury described this as "an attempt to secure 'repayment' from the Exchequer of tax that has not been paid".

Retrospective legislation has been introduced by the government to close the tax avoidance loopholes

A Treasury source suggested that outlawing the tax dodges immediately would save the government a further £2bn in tax that would otherwise have been foregone.
Barclays disclosed the two schemes to the tax authorities under rules which have been in place since 2004.
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.