15/12
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
(SI 2012/519).
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.
David Gauke, Exchequer Secretary to the Treasury, said:
"The Government wants to ensure that the tax system is fair
for all and we will not allow those who seek to benefit from this
aggressive avoidance to get an unfair advantage. 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. The Government is committed
to creating a competitive tax system and we have brought in a range
of corporate tax reforms, but we are absolutely clear that business
must pay the tax they owe when they owe it."
Notes for Editors
1. The legislation will be in the 2012 Finance Bill. The
draft legislation, together with an Explanatory Note and Tax
Information and Impact Note www.hmrc.gov.uk/drafts/ct-loan-technote.pdf,
can be found on the HMRC website.
2. More information on the Banking Code of Practice on
Taxation can be found at www.hm-treasury.gov.uk/press_66_10.htm