Barclays has spoken out after it was named as the bank behind two tax schemes dubbed 'highly abusive' by the UK Treasury.
The bank said the situation arose after it voluntarily disclosed to HMRC it had repurchased some its debt in a tax-efficient way.
'This was based on guidance from professional advisers that the treatment was both legal and compliant with the tax code, and given others had used a similar treatment,' Barclays said, following reports that the two schemes had been blocked by the UK government.
Reports in the Financial Times, Daily Mail and Times named Barclays as the subject of the Treasury's clampdown. The Treasury announced yesterday it was to close the two 'highly abusive' schemes, disclosed to HM Revenue & Customs by a bank, which it did not name.
The schemes, which could have cost the Treasury £500 million, were designed to overcome anti-tax avoidance laws and will be stopped by legislation.
According to the Treasury the first scheme attempted to ensure that the commercial profit arising to the bank from a buyback of its own debt was not subject to corporation tax.
The second scheme involved Authorised Investment Funds and aimed to convert non-taxable income into an amount carrying a repayable tax credit.
The Treasury said the scheme was an attempt to secure repayment of tax that has not actually been paid.
David Gauke (pictured), exchequer secretary to the Treasury, 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.'
In the statement, Barclays said it had also disclosed its involvement in an authorised investment fund, which is legal and compliant with the tax code. But on the basis of that approach, the bank said HMRC and the Treasury had decided to change the tax laws retrospectively to prevent any company from using such treatment again.
'Barclays respects the decision of HMRC and the Government to adjust the tax laws and will, of course, comply with the modified law once it is in place,' the firm said. '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.'