Osborne challenges former bank chief’s criticism of Treasury action to counter avoidance scheme
Barclays will ‘take the axe’ to its tax structuring unit as the bank ‘seeks to clean up its image in the wake of a succession of scandals’, the Financial Times has reported.
Rich Ricci, Barclays investment banking chief, told investors: ‘We have to take a fresh look to see if there are products and services in which ... we no longer deem it appropriate to do business, regardless of financial return. For example, elements of our tax advisory business have generated negative media and political attention.’
The ‘structured capital markets’ unit had attracted unwelcome attention for at least three years, the FT said. ‘Though legal, the avoidance strategies it used on behalf of its clients were politically controversial.’
Antony Jenkins, the bank’s new chief executive, has made it clear that he would not break up the bank. Jenkins continued to be a supporter of the bank’s ‘universal banking model which unites high street and investment banking’, according to The Guardian.
However, a review of the bank’s operations to be published in the first quarter of next year was ‘likely to signal a pull-back from the tax planning operations that have caused controversy for Barclays in the past’.
Nils Pratley, The Guardian's financial editor, observed that ‘the Jenkins mantra seems to be: investment banking can be worthwhile even without the naughty bits, like a department that specialises in elaborate tax planning’.
Osborne defends Treasury response to avoidance scheme
Last week the Commons Treasury Committee published correspondence in which George Osborne challenged the claim, made by the bank’s former chief executive Bob Diamond in May, that the government’s response in February to the bank’s disclosure of a debt buyback arrangement was ‘completely unwarranted’ and that the bank had been ‘singled out’.
HM Treasury announced retrospective legislation on 27 February to counter what David Gauke, the Exchequer Secretary, called ‘contrived arrangements’ to avoid around £300m of corporation tax.
Diamond told Andrew Tyrie, chairman of the committee, that ‘Barclays voluntarily and proactively disclosed to HMRC that we had repurchased some of our debt in a tax efficient manner’. He added: ‘The important judgement from our advisers was that other companies had used a similar treatment; that it was reasonable to assume that HMRC was aware of those similar treatments; and that, because HMRC had taken no action to prevent those treatments, there was a clear precedent to satisfy the test of the spirit of the law.’
In a letter to Tyrie dated 1 June, the Chancellor said it was important to note that there was a legal requirement to disclose to the arrangement to HMRC.
Osborne said HMRC had told him that it was not aware of other companies that had used a similar approach for debt buy-backs. ‘HMRC has not been able to identify any arrangements similar to those put in place by Barclays, nor has any tax adviser or other company identified any such arrangements …’
He added: ‘This was not harsh treatment of a particular bank but rather the first opportunity to block a newly identified avoidance scheme.’
Barclays said it did not want to comment on the letter, telling the FT: ‘We regard this as history … we have moved on.’
Osborne challenges former bank chief’s criticism of Treasury action to counter avoidance scheme
Barclays will ‘take the axe’ to its tax structuring unit as the bank ‘seeks to clean up its image in the wake of a succession of scandals’, the Financial Times has reported.
Rich Ricci, Barclays investment banking chief, told investors: ‘We have to take a fresh look to see if there are products and services in which ... we no longer deem it appropriate to do business, regardless of financial return. For example, elements of our tax advisory business have generated negative media and political attention.’
The ‘structured capital markets’ unit had attracted unwelcome attention for at least three years, the FT said. ‘Though legal, the avoidance strategies it used on behalf of its clients were politically controversial.’
Antony Jenkins, the bank’s new chief executive, has made it clear that he would not break up the bank. Jenkins continued to be a supporter of the bank’s ‘universal banking model which unites high street and investment banking’, according to The Guardian.
However, a review of the bank’s operations to be published in the first quarter of next year was ‘likely to signal a pull-back from the tax planning operations that have caused controversy for Barclays in the past’.
Nils Pratley, The Guardian's financial editor, observed that ‘the Jenkins mantra seems to be: investment banking can be worthwhile even without the naughty bits, like a department that specialises in elaborate tax planning’.
Osborne defends Treasury response to avoidance scheme
Last week the Commons Treasury Committee published correspondence in which George Osborne challenged the claim, made by the bank’s former chief executive Bob Diamond in May, that the government’s response in February to the bank’s disclosure of a debt buyback arrangement was ‘completely unwarranted’ and that the bank had been ‘singled out’.
HM Treasury announced retrospective legislation on 27 February to counter what David Gauke, the Exchequer Secretary, called ‘contrived arrangements’ to avoid around £300m of corporation tax.
Diamond told Andrew Tyrie, chairman of the committee, that ‘Barclays voluntarily and proactively disclosed to HMRC that we had repurchased some of our debt in a tax efficient manner’. He added: ‘The important judgement from our advisers was that other companies had used a similar treatment; that it was reasonable to assume that HMRC was aware of those similar treatments; and that, because HMRC had taken no action to prevent those treatments, there was a clear precedent to satisfy the test of the spirit of the law.’
In a letter to Tyrie dated 1 June, the Chancellor said it was important to note that there was a legal requirement to disclose to the arrangement to HMRC.
Osborne said HMRC had told him that it was not aware of other companies that had used a similar approach for debt buy-backs. ‘HMRC has not been able to identify any arrangements similar to those put in place by Barclays, nor has any tax adviser or other company identified any such arrangements …’
He added: ‘This was not harsh treatment of a particular bank but rather the first opportunity to block a newly identified avoidance scheme.’
Barclays said it did not want to comment on the letter, telling the FT: ‘We regard this as history … we have moved on.’
