The UK parliament's Treasury Select Committee has renewed its pressure on Barclays by releasing letters describing a failed tax avoidance scheme in 2011.
The UK parliament’s Treasury Select Committee has renewed its pressure on Barclays by releasing letters describing a failed tax avoidance scheme in 2011.
Committee chairman Andrew Tyrie noted that much of Barclays’ explanation to the committee for the scheme - ruled illegal by HM Revenue & Customs in February this year - did not agree with the facts, as explained by UK chancellor George Osborne in another letter to the committee.
Barclays launched a debt buyback scheme in December 2011 which netted it £1.1 billion - but its attempts to avoid payment of corporation tax on the profit were ruled retrospectively illegal earlier this year. The UK Treasury described the scheme as “highly abusive“. Barclays paid £300 million in tax, for which it had already made provision in its 2011 results.
Bob Diamond, then chief executive of the bank, blamed his advisors in a letter to Tyrie in May: “Our pursuit of the particular tax treatment for this transaction was based on strong legal guidance, as well as information on market practice in this area from professional advisors… the important judgement from our advisors was that other companies had used a similar treatment,” he wrote, and added that Barclays had reasoned that, since HMRC had not prevented them from doing so, HMRC must therefore be aware of and approve of the approach. Barclays used the same argument in a statement at the time of the ruling in February.
But this was not true, Osborne told Tyrie: “It has been suggested that HMRC was aware of other companies that had used a similar approach for debt buybacks. HMRC tells me that this is not right… had they been consulted in advance of the bank’s transaction they could have made the position clear.” Barclays had ignored the spirit of the law and broken the code of practice on taxation, he added.
This article was first published on Risk