UK Treasury orders Barclays Bank to pay half-a-billion pounds in tax

The UK Treasury has ordered Barclays Bank to pay half-a-billion pounds in tax which the bank had been trying to to avoid.

Accusing Barclays of designing and using two schemes that were intended to avoid substantial amounts of tax, the HM Revenue and Customs (HMRC) took the unusual step of introducing retrospective legislation, intended to end "aggressive tax avoidance schemes" by financial institutions.

The government has since closed the schemes to recover £500 million of lost tax and to ensure payments of billions of more tax in the future.

BBC business editor Robert Peston quoted Barclays as saying that it was surprised by HMRC's reaction to the two schemes, which it believed were in line with those used by other banks.

Announcing the crackdown, David Gauke, exchequer secretary to the treasury, said without naming Barclays that the bank should not have devised the schemes in the first place as all big British banks had signed a code committing them not to engage in tax avoidance.

He said the government did not take the action lightly, but the potential tax loss from the scheme and the history of previous abuse in the area meant that it was a circumstance where the decision to change the law with full retrospective effect was justified.