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Barclays 'engaging in tax avoidance on a grand scale', says TSC member

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Barclays CEO Bob Diamond has side-stepped a request to commit to reducing the number of subsidiary companies Barclays operates in tax havens to demonstrate it will abide by the spirit of the Government’s code of tax practice.

During Diamond’s evidence session at the Treasury select committee this morning, Labour MP and TSC member Chuka Umunna said Barclays has over 300 companies incorporated in tax havens and was engaged in tax avoidance on a “grand scale”.

Diamond said: “I am happy to look at the numbers you gave, I did not have them and it would not be appropriate for me to agree to something that I am not sure of the facts of.”

The Code of Practice on tax for banks aims to encourage banks to follow the spirit and the letter of tax law and not to undertake tax planning to achieve tax results contrary to the intentions of parliament.

The code’s guidance notes say: “The question of whether tax results are contrary to the intentions of Parliament can be answered by asking whether tax consequences of a proposed transaction are too good to be true.”

Barclays has signed up to the code and Diamond says the company comply with the spirit and the letter of the law.

Umunna said according to Barclays Plc annual return the company has 30 companies incorporated in the Isle of Mann, 38 in Jersey and 181 in the Cayman Islands.

Umunna said: “A cursory reading of your group returns show you have over 300 companies operating in tax haven jurisdictions around the world.”

He suggested Barclays, through its structured capital markets division, uses those companies to enable the avoidance of paying UK tax.

He said: “That division runs tax arbitrage for your bank, for high net worth individuals for companies, which enable you to all avoid the payment of UK tax.”

Diamond said: “It is our obligation when we do financing for clients to do it in the most tax efficient way and that is in line with Government policy.”

Umunna said: “Your efficiency may be our avoidance.”

Speaking to Money Marketing after the session TSC member and Conservative MP Mark Garnier said Umunna was raising an important point but their is an upside for consumers which is sometimes overlooked.

He says: “People do not like tax avoidance but if they realised what it meant in terms of getting cheaper services, you probably would concede when push comes to shove they need to be tax efficient to work as hard as they can for customers and shareholders.”

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Readers' comments (4)

  • Well done Umunna and the TSC. Barcleys have been doing this for years (as have many other plc's) and the small concessions they make to avoid further pressure is pitiful. Pensioners pay tax on their meagre incomes but high net worth individuals and corporations think they are above this. Everyone is happy to take the profits from avoidance as they all play the blame game. I hope this is at last the proverbial about to hit the fan - don't back off again TSC, dig deeper!!

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  • Of course Barclays didn't mess up and come cap in hand for tax payers money!

    Tax avoidance is legitimate its what you do when you use an ISA!

    It is only tax evasion that is illegal. If leglisators don't like avoidance it's up to them to pass legislation to turn avoidance into evasion. That way we all know what is what.

    HM Revenue and Customs have drafted new laws penalising ‘deliberate wrongdoing’ - but this isn’t about hiding money in foreign bank accounts.
    Instead, ‘deliberate wrongdoing’ is defined as an act capable of causing a ‘loss of tax.’ This in turn is defined as ‘relief, reduction, repayment or credit of any kind.’ These definitions mean that any advice on saving tax could be subject to a penalty.

    The maximum penalty is 100% of the tax ‘lost’, but with minimum £5,000 (reduced to £1,500 if you confess your wrongdoing to HMRC before they discover about it). There is also a ceiling of £50,000 - but this is per person, per tax, per year, so it could be much higher.

    To quote Lord Clyde in his famous judgment in the case of Ayshire Pullman Motor Services V Inland Revenue Commissioners 1929:

    “No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or his property as to enable the Inland Revenue to put the largest possible shovel into his stores”.

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  • All those who can afford to use tax havens are doing it, politicians and their donors are no exception.

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  • Blimey! Not often I agree with Simon Mansell!

    To summarise, some Labour MP trying to make a name for himself has accused Barclays of... doing something totally legitimate!

    The government gets to write the rules; they can't bitch about people playing by them.

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