Barclays cited for tax avoidance

Barclays PLC revealed Tuesday that it is the bank targeted by the British Treasury's action to shut down two methods of avoiding tax, a change in the law that could cost the bank up to £500 million (US$800 million).

Insisting that its methods complied with existing law, Barclays said it had voluntarily informed tax officials that it had repurchased some of its debt "in a tax-efficient manner".

"Barclays also disclosed its participation in an authorised investment fund which is also legal and compliant with the tax code," the bank said.

On Monday, the Treasury had described the two methods as "highly abusive" and intended to circumvent tax laws. It is drafting legislation to bar these arrangements retrospectively to December 1.

"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," David Gauke, a senior Treasury official, said Monday.

The Treasury noted that Barclays was among the banks which had signed up to a code pledging that they would not indulge in tax avoidance.

The British government has said it could charge the bank more than £500 million to make up for the unpaid tax, but the bank reportedly disputes the amount.

"Barclays respects the decision ... to adjust the tax laws and will, of course, comply with the modified law once it is in place," the bank said, adding that the change would not have a material impact on profit and would not require amendment of its preliminary results released on February 10.

-AP