Banks need clear tax system: Tyrie

Forcing banks to sign up to badly drawn taxation guidelines risks fuelling tax dodging, a senior Tory has warned.

Treasury committee chairman Andrew Tyrie said complicated laws created "opportunities" for avoidance and raised concerns that an "ill-defined" code of practice for the industry added to the problem.

Mr Tyrie also cautioned the Treasury against using the "nuclear option" of imposing retrospective tax bills on institutions - as it did earlier this year with Barclays - claiming it was unfair.

It comes as the Commons committee publishes a letter from the Chancellor explaining his decision to claw back £300 million from Barclays by changing the law after it used two avoidance schemes.

Mr Tyrie said: "Regardless of the specifics of this case, retrospection conflicts with the principles that should underpin any fair and internationally competitive tax regime.

"The development of a code of practice on taxation, requiring banks to adhere to ill-defined standards in addition to the law, risks making the tax system even more ambiguous.

"Before reaching for what some might consider the nuclear option of retrospection, we need to consider why the law is delivering so many unintended consequences."

The Treasury closed two tax loopholes in February after Barclays tried to avoid paying millions in "highly abusive" dodges.

A Treasury spokeswoman said: "The Government has been clear that the use of retrospective legislation must be exceptional, as it was in this case where we closed an aggressive scheme which posed a significant risk to the Exchequer.

"We are committed to tackling tax avoidance and closing aggressive avoidance schemes and have reinvested over £900m in HMRC over this spending period to boost its ability to tackle avoidance, evasion and tax fraud."