The Treasury has rushed in legislation to close two "aggressive" tax avoidance schemes which will force an unnamed bank to pay more than £500m in tax.
One scheme allows the bank to avoid paying corporation tax on profit it makes from buying back it own debt. Reuters calculated that the move could cost a bank such as Barclays some £120m as it made more than £450m when it bought back bonds. Barclays, which is not alone in buying back its debt, refused to comment.
The second scheme involves authorised investment funds where the bank aims to convert non-taxable income into an amount carrying a repayable tax credit to secure a repayment from the exchequer even though tax has not been paid.
In a separate development, HSBC revealed it could be hit with a potential tax bill of up to $4.9bn (£3bn) if it loses an ongoing dispute with HM Revenue and Customs over the way it structures its business.
Announced by exchequer secretary David Gauke, the Treasury said its crackdown was a "bold step not previously taken" to act retrospectively to prevent the use of the first scheme regarding the buy-back of debt.
Treasury sources indicated that up to £2bn of tax revenue might have been forgone across the industry as a result of these schemes.
"We do not take this 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," said Gauke. The Treasury said transactions were not in the spirit of the code on conduct on tax the bank signed in 2010, along with 200 others, to behave within the spirit of the law on tax.
His remarks came as HSBC disclosed in its annual report that it was involved in an unrelated dispute with the government over the way it pays tax on dividends from its Asian operations. The dispute focuses on a decision by HSBC to hold shares in its Asian and some European subsidiaries through a Dutch company and believes it should not pay UK tax on dividends it receives. However, HMRC argues that the bank, through its controlled foreign company (CFC) rules, should pay tax in the UK as rates in the Netherlands are lower.
The dispute covers the period from 2002 to 2009. "In the event of an adverse outcome from our ongoing discussions with HMRC on the CFC and other open tax issues the tax payable and financial impact could be as high as $4.9b, plus related interest expense," HSBC said
Source: Treasury closes 'aggressive' tax avoidance schemes | Business | The Guardian
One scheme allows the bank to avoid paying corporation tax on profit it makes from buying back it own debt. Reuters calculated that the move could cost a bank such as Barclays some £120m as it made more than £450m when it bought back bonds. Barclays, which is not alone in buying back its debt, refused to comment.
The second scheme involves authorised investment funds where the bank aims to convert non-taxable income into an amount carrying a repayable tax credit to secure a repayment from the exchequer even though tax has not been paid.
In a separate development, HSBC revealed it could be hit with a potential tax bill of up to $4.9bn (£3bn) if it loses an ongoing dispute with HM Revenue and Customs over the way it structures its business.
Announced by exchequer secretary David Gauke, the Treasury said its crackdown was a "bold step not previously taken" to act retrospectively to prevent the use of the first scheme regarding the buy-back of debt.
Treasury sources indicated that up to £2bn of tax revenue might have been forgone across the industry as a result of these schemes.
"We do not take this 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," said Gauke. The Treasury said transactions were not in the spirit of the code on conduct on tax the bank signed in 2010, along with 200 others, to behave within the spirit of the law on tax.
His remarks came as HSBC disclosed in its annual report that it was involved in an unrelated dispute with the government over the way it pays tax on dividends from its Asian operations. The dispute focuses on a decision by HSBC to hold shares in its Asian and some European subsidiaries through a Dutch company and believes it should not pay UK tax on dividends it receives. However, HMRC argues that the bank, through its controlled foreign company (CFC) rules, should pay tax in the UK as rates in the Netherlands are lower.
The dispute covers the period from 2002 to 2009. "In the event of an adverse outcome from our ongoing discussions with HMRC on the CFC and other open tax issues the tax payable and financial impact could be as high as $4.9b, plus related interest expense," HSBC said
Source: Treasury closes 'aggressive' tax avoidance schemes | Business | The Guardian
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