Barclays evaded nearly £ 2bn in taxes through a lucrative deal in Luxembourg that allowed it to pay less than 1% on tax haven profits for more than a decade.
A Guardian analysis of Barclays’ tax accounts shows that it is still benefiting from a controversial 2009 decision, which saw profits from the sale of a $ 15.2 billion fund management business in Luxembourg rather than the United States. kingdom where it is based.
By recording profits abroad, Barclays has been able to take advantage of a sophisticated scheme that can offset future profits against a decline in the value of the company’s shares, which it acquired as part of the deal.
The decision led Barclays to earn billions of pounds almost tax-free for more than 12 years and raised questions about whether it had influenced the bank’s strategy to invest or grow its business in Luxembourg at the expense of other places, including the United Kingdom.
Labor MP Margaret Hodge said: “These revelations that Barclays is using a scheme in a notorious tax haven leave the bank with a British headquarters with important questions to answer.
“Why is Barclays opening a store in Luxembourg at all, except to avoid taxes? Does this artificial financial agreement mean that profits are transferred from the United Kingdom, thereby harming our tax havens? Or has business investment been channeled through this tax haven instead of the UK, which has hurt our economy in the process?
Barclays employs only 54 people in Luxembourg, but is currently the bank’s third most profitable jurisdiction after the United States and the United Kingdom, with a turnover of £ 1.1 billion last year. Low staff costs mean that Barclays can turn almost all of these corporate and investment banking revenues into profits.
The bank has 46,000 employees in the UK and nearly 10,000 in the US.
Overall, Barclays’ operations in Luxembourg have made a profit of £ 6.6 billion since 2013, according to annual tax documents released by the bank. Thanks to a generous tax deal, he paid only £ 46 million of that revenue, or about 1%.
Barclays could be taxed at between 25% and 30% if it did not take advantage of rules that allow it to recoup $ 9 billion in stock losses gained through the sale of its Barclays Global Investors (BGI) business to the United States. fund manager BlackRock in 2009
This means that the bank could save 1.9 billion pounds in taxes during the period, although collective savings are likely to be much higher, as it began publishing tax information for each country only in 2013 in response to EU rules. Reuters first unveiled the tax deal in 2016, but the benefits were unknown.
Barclays does not mention the BGI deal by name in its annual tax returns, but has said for years that its low tax bills are due to previous losses.
“We did not pay corporate tax in Luxembourg in 2021 because our taxable profits were offset by significant tax losses carried forward from previous years, and also because dividend income is not taxable under Luxembourg law,” the statement said. 2021 report. “We have unused tax losses that are automatically carried forward and available to offset future taxable profits.”
Barclays said in a statement: “The structure of BGI’s sales is not aimed at providing tax relief, but aims to provide simpler and safer tax treatment and avoid variability in the bank’s regulatory capital. He said he had not registered any profits from other jurisdictions in Luxembourg, and stressed that he had paid more than £ 14 billion in taxes in the UK over the past decade.
Barclays’ activities in Luxembourg, which were set up in 2007, have caused controversy before. Former chief executive of the bank Anthony Jenkins has promised to close a unit in the Grand Duchy, which helped wealthy customers avoid taxes in 2013.
At the time, the bank reported profits of about £ 1.4 billion, about £ 100 million for each of the 14 people working there. The closure of the unit led to a drop in local profits in the following years, falling to £ 318 million in 2018.
However, Barclays has announced new investments in 2019, helping profits to recover to more than £ 1.1 billion by 2020. It has included expanding services to its multinational customers, although its staff has grown to just over 50 employees.
Today, the bank offers a range of services outside of Luxembourg, which it says are focused on serving local customers and offering cash, debt, currency and trade finance management.
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