£500m tax avoidance sting for ‘abusive’ Barclays
By Alex Stevenson Follow @alex__stevenson
High street bank Barclays is being forced to pay £500 million to the taxman after an unusual move from ministers.
The government is using retrospective legislation to claw back the funds, which Barclays had sought to keep using two schemes condemned as "highly abusive" by the Treasury.
It said neither a move to keep commercial profit from the buyback of its own debt nor a scheme to secure 'repayment' of a tax that had not been paid were acceptable from a bank which had signed up to the banking code of practice on good taxation.
"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," Treasury minister David Gauke said.
"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.
"The government is committed to creating a competitive tax system and we have brought in a range of corporate tax reforms, but we are absolutely clear that business must pay the tax they owe when they owe it."
Barclays, which did not require a state bailout during the financial crisis of 2008 or afterwards, registered a three per cent fall in profits to £5.9 billion last year and capped its cash bonuses at £65,000. The bonus pool was cut by 25% to around £2.15 billion.
Today's move from HM Revenue and Customs will come as a blow, however. It has reportedly claimed other banks have used similar schemes to avoid tax in the past.
The £500 million gained by the Treasury will come as welcome relief for chancellor George Osborne, who warned yesterday that there is no money available for tax cuts or to stimulate the economy.
"The British government has run out of money because all the money was spent in the good years," Mr Osborne said yesterday.
"The money and the investment and the jobs need to come from the private sector."
Tory backbenchers have been joined by the Institute for Fiscal Studies thinktank and deputy prime minister Nick Clegg in urging No 11 to consider emergency tax cuts to kickstart the economy.
Mr Osborne is expected to abandon a cut in fuel duty in the Budget on March 21st, but is said to be considering tax cuts for businesses and the extension of the tax-free personal allowance.