UK says bank tried to avoid $800 million in tax
LONDON—Britain has ordered a bank to pay half a billion pounds ($800 million) in unpaid tax that it tried to avoid by exploiting regulatory loopholes, a government minister said Monday.
Exchequer Secretary David Gauke said the bank had sought to use an "aggressive" avoidance scheme to dodge corporation tax on profit made buying back its own debt. It also carried out a scheme to seek "repayment" from the government of tax it had never paid.
Gauke said both practices were "wholly unacceptable, against the intentions of Parliament and the spirit of the law."
The government did not name the bank, but the Financial Times, the Daily Telegraph and the Times of London newspapers identified it as Barclays PLC. Barclays could not immediately be reached for comment.
In December, Barclays announced a plan to buy back 2.5 billion pounds of its debt at a discount to boost its capital holdings.
Britain's Treasury said only that the bank in question was one of the financial institutions that have signed up to a code of conduct promising to "follow the spirit of the law in addition to the letter" where taxation is concerned.
Gauke said the bank had disclosed the practices voluntarily and been told to pay more than 500 million pounds in tax.
The Treasury said it had introduced legislation Monday to close the loopholes, and that it would apply retroactively.
It said the changes "will ensure the payment of over half a billion pounds in tax, protect further billions of tax from being lost and maintain fairness in the tax system."
"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," Gauke said.