Barclays ‘treated fairly’ in HMRC tax avoidance investigation

Chancellor George Osborne denies former Barclay bosses claims that the bank was treated unfairly by HMRC during their tax avoidance investigation.

In February of this year, high street bank, Barclays, was accused of implementing two ‘aggressive’ tax avoidance schemes which enabled them to allegedly avoid millions of pounds in tax; both tax avoidance schemes were closed by HM Revenue and Customs.Barclays Tax Avoidance

The bank’s former boss, Bob Diamond, claims that HMRC’s tax avoidance investigation treated Barclays unfairly and singled them out for their use of widely adopted legal tax avoidance schemes; an allegation which Osborne had rejected.

In a letter to the Treasury Select Committee, Osborne writes that Barclays Bank was to blame and that the tax avoidance arrangements in place would have been closed down by HMRC sooner, had they been aware of the tax avoidance schemes:

“It has been suggested that HMRC was aware of other companies that had used a similar [tax avoidance] approach for debt buy-back. HMRC tells me that this is not right. HMRC has not been able to identify any arrangements similar to those put in place by Barclays, nor has any tax adviser or other company identified any such arrangements and HMRC would challenge anything that came to light.”

Chairman of the Treasury Committee, Andrew Tyrie, says complicated tax laws are to blame for tax avoidance arrangements and he points the finger at the “ill-defined” industry code of practice. Tyrie thinks that the £300m retrospective tax bill imposed on Barclays by Osborne was unfair and that this ‘nuclear option’ should be avoided in the future:

“Regardless of the specifics of this case, retrospection conflicts with the principles that should underpin any fair and internationally competitive tax regime. The development of a code of practice on taxation, requiring banks to adhere too ill-defined standards in addition to the law, risks making the tax system even more ambiguous.

“Before reaching for what some might consider the nuclear option of retrospection we need to consider why the law is delivering so many unintended consequences. There can be little doubt that those opportunities for avoidance – the unintended consequences – exist because the law is so complex.

“There is, therefore, something that might be done about it: simplify the tax system. In its response to the committee’s Budget report, the Government confirmed that retrospection will be restricted to wholly exceptional circumstances. That must be right.

“Better still, steadily reform and simplify the tax system to the point that the Government doesn’t feel the need to reach for retrospective legislation to protect the tax yield.”

Again proclaiming their commitment to reducing the UK tax deficit by targeting tax avoidance tax evasion and tax fraud, a spokesperson from HMRC said:

“The Government has been clear that the use of retrospective legislation must be exceptional, as it was in this case, where we closed an aggressive scheme which posed a significant risk to the Exchequer.”

HMRC’s spokesperson also acknowledged that HMRC are continuing their ongoing work to simplify the tax system with the help of the independent Office for Tax Simplification.

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