The Righteous are now a-wailin' and a-moanin' that this is retrospective legislation, ooh, how horrible, end of the world etc, but it is nothing of the sort, and what puzzles me is that Barclays Bank ever thought they would get away with it.
The basic rule, subject to lots of exceptions, was always that if Company A owes Company B money and does not/cannot pay up, Company B claims a deduction (bad debt relief) and Company A is taxed on the saving. So if BB owes people £2.5 billion in bonds and buys back those bonds for a lot less than £2.5 billion (and this was all public knowledge at the time) then the discount/underpayment counts as a profit for BB, shows up in BB's accounts as a profit and BB has to pay tax on that profit.
HMRC's explanatory note explains the background in more detail. It appears, that BB were trying to play clever buggers, and instead of buying back their own bonds (which would trigger a tax charge), they arranged for a friendly entity to buy it back instead. Then, under the cover of darkness and while HMRC weren't looking (they hoped) BB would obtain control of that entity and quietly cancel the bonds (you can't owe yourself money).
I would have assumed that s362 CTA 2009 would have caught that anyway; HMRC seem to have admitted that on a narrow reading it didn't, but all HMRC have done is to make it clear that if it is pre-planned that the borrower is going to obtain control of the other entity, then this is sufficient to trigger a charge.
All seems fair enough to me, to the extent that you think incomes and profits should be taxed in the first place. What is spiteful is that in many cases, the creditor gets no tax relief for his loss, even though the debtor is taxed on his gain, separate topic.
Muh, Far Right
38 minutes ago
10 comments:
Usual all day hysterical mis-reporting by the stooges at the Beeb...
L, I can't see any coverage of this at the Beeb. They probably think it serves Barclays right.
MW - It was this a.m. on Today on R4. Talking about tax 'avoidance' as if it was a sin. But if you'd pointed out that if they all used ISA's and pensions they were engaging in tax 'avoidance'....
L, I think you are confusing the Lefteous with the Righteous.
As far as I can see, Barcalys thought it was worth a punt on a nothing-ventured-nothing-gained basis; HMRC said "Come off it, lads" and Barclays said "OK, fair cop."
Nothing particularly unusual about the whole thing, apart from the sums involved.
But none of this makes retrospective legislation legitimate.
If Barclays were taking a punt on getting away with breaching the rules then fair enough if they get caught out - but that would not require retrospective legislation and would not make the treasury admit to making retrospective rulings. After all they are against EU and UN treaties.
If Barclays were acting in accordance with the rules, however badly written those rules may have been, then the fault lies with the existing law.
Either way the government and HMRC have made complete fools of themselves.
W42: "If Barclays were taking a punt on getting away with breaching the rules then fair enough if they get caught out"
I do this for a living, I'm not sure how much clearer I can make it.
Barclays were taking a punt, they were breaching the rules, they were caught out and it is fair enough.
But as usual, the Lefteous stick to their prejudices that Barclays tax planning was the work of Satan and the Righteous stick to their prejudices that Barclays are saint and angels and the government is evil, is it heck, it is the government that is keeping these banks going in the first place.
The fact that some smart arse barrister held s362 up to the light, squinted at it sideways and read it back to front to "prove" that it didn't literally mean what everybody else thought it meant is not my problem. All HMRC have done is introduce a new law which says exactly what everybody thought s362 said all along.
MW - No I quite agree with you - Bx tried it on and it didn't work. But, I was merely commenting on the consequential hysterical lefteous 'tax avoidance is bad' meme - which it isn't. And it's legal, since we all do some of it.
(And some of us do it illegally by taking or paying cash - good:-
"Support the black economy, it's the only bit that's growing".
That what I say)
L; "Support the black economy, it's the only bit that's growing"
Agreed, only it's called "shadow economy" nowadays.
Yes, you're not allowed to call it the black economy any more, but OTOH, the shadow economy's the only economy that's in the black.
HMRC's explanatory note explains the background in more detail. It appears, that BB were trying to play clever buggers, and instead of buying back their own bonds (which would trigger a tax charge), they arranged for a friendly entity to buy it back instead. Then, under the cover of darkness and while HMRC weren't looking (they hoped) BB would obtain control of that entity and quietly cancel the bonds (you can't owe yourself money).
This seems the same sort of thing as we've just been discussing elsewhere.
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