June 2013 News

Barclays and HSBC save £2.6bn

A report by the Tax Justice Network accuses Barclays and HSBC of underpaying £2.6bn UK corporation tax between 2009 and 2012. However, the figure has been arrived at on the basis of an imagined unitary taxation system that would see global businesses taxed on profits on a country-by-country basis.

Both banks take issue with the figures which are based on a comparison between turnover and corporation tax. Around 40% of Barclays’ global operations are based in the UK, with UK corporation tax making up around 11% of its global tax bill, the report says. HSBC has 17% of its staff based in the UK, with its corporation tax charge in the UK of £1.1bn accounting for 10% of its global bill.

A spokesperson for HSBC said: ‘HSBC paid $9.3bn in tax globally last year. This demonstrates that we do not employ a strategy to avoid UK or other taxes. The $1.6bn (£1.04bn) paid in the UK puts us amongst the highest tax payers in the FTSE 100. HSBC applies to the spirit and letter of the law in all territories in which it operates and seeks to comply with the UK Code of Practice for the taxation of banks.’

Although the UK’s lower corporate tax rate explains the figures in part, the report claims the banks use ‘generous’ tax breaks to artificially reduce their bills.

Barclays slammed by Lord Lawson

The now defunct Barclays controversial tax avoidance division generated revenue of £1bn a year between 2007 and 2010 according to a report commissioned by the bank. Profits were not published, but former conservative chancellor Lord Lawson – who sits on the parliamentary commission for banking standards – has accused the division of engaging in ‘industrial-scale tax avoidance’.

Big four accused of undue influence

MPs in the Public Accounts Committee have enraged HMRC and many members of the accountancy profession by claiming that the big four accountancy firms exert an ‘undue influence’ over the formation of tax law and policy. The committee was also concerned over the complexity of the tax code domestically and internationally and HM Revenue & Customs’ attempt to tackle tax avoidance with the resources at its disposal.  MPs have suggested that it is ‘fighting a battle it cannot win’.

The report recommends a consultation on rules banning tax-avoiding firms from winning government contracts is extended to include companies providing tax advice. The Treasury has said that such a move would be ‘absurd’.

100% growth in 14 years

Tolley’s Tax Guide, the annual reference book on which the accountancy profession depends, now numbers 16,200 pages of close type. It has more than doubled in size since 1997.

VAT seizures double

The number of asset seisures by HM Revenue & Customs over unpaid VAT doubled in the last year for which records are available. Some 4,746 seizures were made in the year to 31 March 2012, up from 2,401 the previous year – equivalent to a 98% rise.

High net worth individuals pay up

HMRC’s High Net Worth Unit has announced that it generated revenue of £220m over 2012/13. The unit, which scrutinises the affairs of 5,800 people with assets of £20m or more, has generated a total of £665m in additional tax over the last four years, in addition to the tax HMRC normally collects from the group.

HMRC trawls online

An article in Computing magazine has revealed that HMRC is trawling the world wide web, including social media and other websites in which people share information, in a bid to find potential evidence of tax fraud that it can feed into its new Connect data warehouse. Mike Hainey, head of analytics at HMRC, told the magazine that since the implementation of Connect, the organisation’s ‘big data’ analytics system, the organisation has started feeding in information from the internet to help it better target tax investigations. Information comes from social media and business sites and is merged with data from a wide range of other governmental and non-governmental sources.

Osborne lodges Tobin protest

The UK government has launched legal proceedings against the financial transactions – or Tobin – tax set to be adopted by 11 EU states. George Osborn, the chancellor of the exchequer, believes that the tax could have a major effect on the UK economy. However, European leaders, including France’s François Hollande, have placed the Tobin Tax at the top of their agenda in order to make banks ‘pay’ for the financial crisis, and act as a key source of revenue.

Exchange of information

The UK government is to develop and pilot a information exchange with France, Germany, Italy and Spain as the countries look to close the net on tax evaders. Under the agreement, financial information will be automatically exchanged between the five countries in order to help catch and deter tax evaders as well as provide a template for a wider multilateral automatic tax information exchange.

Luxembourg is to relax its banking secrecy and sign up to the EU Savings Directive by entering into an automatic information exchange with the rest of Europe, according to the principality’s prime minister. The exchange will commence from 1 January 2015. It will not apply to companies, only to individuals. Austria as the only country in the union not signed up to the EU Savings Directive.