The Government took the highly unusual step of introducing retrospective legislation back in February, saying it would close two "aggressive tax avoidance schemes" used by Barclays and applied a new tax to a bond buyback the bank did in December. This could see Barclays having to pay back over £120 million.
Barclay’s chief executive Bob Diamond said in a letter to the Treasury Select Committee dated May 15th but only released this week: "The way in which this situation was handled seems to us to have been completely unwarranted."
Mr Diamond's letter went on to say: "We were ... surprised to be singled out in the way that occurred; not only through a retroactive change of law, but the effective naming of Barclays ... accusing the bank of entering into a 'highly abusive' scheme".
"Unnecessary damage was placed on Barclays reputation just at a time when the focus should be on rebuilding confidence and accelerating growth, not undermining it," Diamond added.
Tax avoidance is not illegal, of course, and Barclays designed the two schemes, one involving not having to pay corporation tax on profits made when buying back its own IOUs, the other involving investment funds claiming that non-taxable income entitled the funds to tax credits that could be reclaimed from HMRC and disclosed both to HMRC under rules that have been in place since 2004.
However, the timing is embarrassing, with the letter being published less than a week after the bank held its “citizenship day”, when it set out its commitments on matters such as tax avoidance.
For more information, please visit www.milsted-langdon.co.uk
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