US taxman cracks down on cross border bank deals

THE US TAX AUTHORITY is attempting to clamp down on what it believes is tax avoidance taking place between American and UK banks.

US banks are suing its government for more than $1bn (£640m) in tax credits, relating to deals the Internal Revenue Service has knocked back for what it believed was the creation of foreign tax credits.

Alongside the four US banks named by the FT and ProPublica joint investigation, Barclays was named as a promoter of the cross-border deals.

The transactions in the spotlight are known as structured trust advantaged repackaged securities (Stars). The report said that some of the deals of concern to the IRS saw a single tax payment create a benefit for two companies in different countries.

Barclays said it complied with tax laws in the UK and all the countries where it does business. The US banks declined to comment to the FT.

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