HM Treasury announces retrospective legislation to close “highly abusive” schemes
The Government announced today that it is to close two tax avoidance schemes operated by a bank that is a signatory to the Banking Code of Practice on Taxation. The Treasury said that “the Government is clear that these are not transactions that a bank that has adopted the Code should be undertaking”.
“The Government has today taken steps to close two aggressive tax avoidance schemes recently disclosed to HM Revenue & Customs (HMRC) by a bank.
The schemes, both of which are highly abusive, are designed to work around legislation that has been introduced in the past to block similar attempts at tax avoidance. By acting immediately, the Government 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.
The first scheme seeks to ensure that the commercial profit arising to the bank from a buyback of its own debt is not subject to corporation tax. In a bold step not previously taken by this Government, legislation is being introduced today that will not only prevent the scheme’s use in the future, but will also act retrospectively to block its recent use by the bank that has disclosed the scheme and by any other company that has engaged in a similar scheme in the same period.
The second scheme involves Authorised Investment Funds (AIFs) and aims to convert non-taxable income into an amount carrying a repayable tax credit in an attempt to secure ‘repayment’ from the Exchequer of tax that has not been paid. The Government is introducing legislation today to block any future use of the scheme.
The bank that disclosed these schemes to HMRC has adopted the Banking Code of Practice on Taxation which contains a commitment not to engage in tax avoidance. The Government is clear that these are not transactions that a bank that has adopted the Code should be undertaking.”
The Banking Code of Practice on Taxation is here.
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