Revealed: Barclays avoids almost £2bn in tax via Luxembourg scheme

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Barclays has avoided astir £2bn successful taxation via a lucrative statement successful Luxembourg that allowed it to wage little than 1% connected profits successful the taxation haven for much than a decade.

A Guardian investigation of Barclays’ taxation bills shows it is inactive benefiting from a controversial determination successful 2009, successful which it booked profits from the $15.2bn merchantability of a money absorption concern successful Luxembourg alternatively than successful the UK wherever it is headquartered.

By booking the profits overseas, Barclays was capable to instrumentality vantage of a analyzable strategy whereby it could offset aboriginal profits against a driblet successful the worth of institution shares it acquired arsenic portion of the deal.

The determination has resulted successful Barclays earning billions of pounds astir tax-free for much than 12 years, and has raised questions astir whether it influenced the bank’s strategy successful investing oregon increasing the Luxembourg concern astatine the disbursal of different locations, including the UK.

The elder Labour MP Margaret Hodge said: “These revelations that Barclays is utilizing a strategy successful an infamous taxation haven leaves the British-headquartered slope with important questions to answer.

“Why is Barclays mounting up store successful Luxembourg astatine all, different than to debar tax? Does this artificial fiscal statement mean that profits are shifted distant from the UK, frankincense harming our taxation coffers? Or person concern investments been channelled done this taxation haven alternatively of successful Britain, harming our system successful the process?”

Barclays employs lone 54 unit successful Luxembourg, but it is presently the bank’s third astir profitable jurisdiction down the US and UK, with turnover of £1.1bn past year. Low unit costs mean Barclays tin crook astir each of that income from firm and concern banking into profit.

The slope has 46,000 unit successful the UK and astir 10,000 successful the US.

Cumulatively, Barclays’ Luxembourg operations person made £6.6bn successful profits since 2013, according to yearly taxation documents released by the bank. Thanks to the generous taxation arrangement, it has paid lone £46m connected those earnings, oregon astir 1%.

Barclays could person been taxed betwixt 25 and 30% had it not taken vantage of rules allowing it to offset losses linked to $9bn-worth of shares acquired done the merchantability of its Barclays Global Investors (BGI) concern to the US money manager BlackRock successful 2009.

It means the slope could person saved £1.9bn successful taxation implicit the period, though the corporate savings are apt to beryllium overmuch higher due to the fact that it lone started releasing country-by-country taxation accusation successful 2013 successful effect to EU rules. Reuters archetypal revealed the taxation statement successful 2016, but the grade of the benefits were not known.

Barclays has not referenced the BGI woody by sanction successful its yearly taxation reports, but has said for years that its debased taxation bills are due to the fact that of erstwhile losses.

“We paid nary corp taxation successful Luxembourg successful 2021 arsenic our taxable profits were offset by important taxation losses brought guardant from anterior years, and besides owed to dividend income not being taxable nether Luxembourg law”, its 2021 study stated. “We person unused taxation losses which are automatically carried forward, and disposable to offset against aboriginal taxable profits.”

Barclays said successful a statement: “The operation of the BGI merchantability was not aimed astatine securing a taxation simplification but intended to unafraid a simpler and much definite taxation attraction and debar volatility successful the bank’s regulatory capital.” It said it had not booked immoderate profits from different jurisdictions successful Luxembourg, and stressed that it paid much than £14bn successful taxes successful the UK implicit the past decade.

Barclays’ Luxembourg operations, which were established successful 2007, person courted contention before. The bank’s erstwhile main enforcement Antony Jenkins pledged to unopen down a portion successful the Grand Duchy that helped affluent customers debar taxation successful 2013.

At the time, the slope was reporting profits of astir £1.4bn, astir £100m for each of the 14 radical employed there. The winding down of the portion resulted successful a driblet successful section profits successful consequent years, falling arsenic debased arsenic £318m successful 2018.

Barclays, however, announced caller concern successful 2019, helping profits rebound to much than £1.1bn by 2020. It progressive expanding services for its multinational clients, contempt its unit basal lone expanding to conscionable implicit 50 employees.

Today the slope offers a scope of services retired of Luxembourg, which it said was focused connected serving section clients and offering currency management, debt, overseas speech and commercialized finance.