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Government shuts down Barclays' £500 million tax avoidance schemes


Treasury minister says retrospective legislation will be used in strong cases

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The government closed down two tax avoidance schemes worth £500 million, Exchequer secretary to the Treasury David Gauke said on Monday, after they were said to be disclosed by Barclays Bank,

The closing of the schemes would be worth an immediate £500 million to the Exchequer and would "protect further billions of tax", Gauke said.

The bank, which has not been officially named, is understood to be Barclays. Under HM Revenue & Customs' Disclosure of Tax Avoidance Schemes (DOTAS) regulations, the bank informed HMRC of the two schemes.

The first scheme involved banks buying back their issued debt that was trading at a discount in the market and using corporation tax relief to avoid paying tax on the profits, which had been addressed in the Finance Act 2010 and subsequent ministerial statements.

"Despite these clear statements, the bank has now entered into a scheme using contrived arrangements that once again seeks to ensure that the profit on a buyback of such debt is not subject to corporation tax and therefore that a substantial amount of tax, of around £300 million pounds, is avoided," Gauke said.

Gauke also criticised the bank, which he did not name, for acting against its code of practice.

"The bank has adopted the code of practice which contains a commitment not to engage in tax avoidance. The government is clear that this not a transaction that a bank that has adopted the code should be undertaking," he said.

The second scheme exploited provisions of the Authorised Investment Fund (AIF) regulations to generate the repayment of tax that has never been paid.

Gauke added that the government would introduce retrospective legislation "where we believe there is a potentially strong case".

Photo credit: Reuters

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Government shuts down Barclays' £500 million tax avoidance schemes
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