Britain shuts bank tax loopholes

Recovery of 0.5 bn pounds from Barclays sought

Britain has closed down two tax avoidance schemes as it seeks to claw back half a billion pounds (590 million euros, $793 million) in lost revenue from Barclays bank, reports said on Tuesday.

A day after Exchequer Secretary to the Treasury, David Gauke, said the government was shutting the loopholes with immediate effect, Barclays said it "respects" the decision "to adjust the tax laws."

The bank added that the government was acting in response to information disclosed voluntarily by Barclays, but would not comment on reports that the Treasury was seeking to reclaim half a billion pounds from the bank.

"The retrospective change in legislation enacted would not have a material impact on Barclays profits and would not cause Barclays to alter its preliminary results which were published on 10 February," the bank said in a statement.

British media said the government's "unusual" move to introduce retrospective legislation to tackle such tax avoidance was a blow to Britain's biggest banks after they had signed a code preventing such behaviour.

Tax avoidance is not illegal, in contrast to tax evasion which is a crime, but highly artificial schemes set up with the sole intention of avoiding tax may be considered improper by tax authorities.

The news also comes as British banks face public anger over the high level of bonuses paid to their staff, especially by bailed-out Royal Bank of Scotland.

Speaking about the loopholes, Gauke said in a Treasury statement that the government was clear that "business must pay the tax they owe when they owe it".

He added: "The government wants to ensure that the tax system is fair for all and we will not allow those who seek to benefit from this aggressive avoidance to get an unfair advantage.

"We do not take (this) action lightly, but the potential tax loss ... 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 loopholes involved Barclays avoiding corporation tax after making profits from buying back its own debt.

The bank added: "Barclays also disclosed its participation in an authorised investment fund which is also legal and compliant with the tax code."
 

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