On 28 February 2012 it was reported that the UK has taken steps to close what it calls two highly abusive tax avoidance schemes, disclosed to HM Revenue and Customs (HRMC) by a bank.
The aggressive schemes are designed to work around legislation that has been introduced in the past to block similar attempts at tax avoidance. HMRC stresses that by acting immediately it can ensure the payment of over GBP500m (USD792m) in tax, protect further billions of tax from being lost and maintain fairness in the tax system.
The Treasury has provided details of the two schemes; the first of which it says seeks to ensure that the commercial profit arising to a bank from a buyback of its own debt is not subject to corporation tax. The government will now introduce legislation to prevent the scheme’s use in the future. The legislation will also apply retrospectively to block its recent use by banks.
The second scheme involves Authorized Investment Funds (AIFs) and aims to convert non-taxable income into an amount carrying a repayable tax credit in an attempt to secure ‘repayment’ from the Exchequer of tax that has not been paid. The government is also introducing legislation to block any future use of this second scheme.
