GEORGE Osborne has given up mooted plans to ban banks from offsetting their tax liabilities against past losses, saying that his £2.5bn bank levy has rectified the problem of banks “not paying enough tax” under Labour.
The chancellor was responding to the row over Barclay’s 2009 UK corporation tax bill of £113m.
But despite Osborne having once raised the possibility of doing away with the widely accepted, long-standing regime whereby all firms – not just banks – can reduce corporation tax bills on the back of past losses, the Treasury said yesterday that it had no plans to change policy.
The coalition last year announced plans to shave one per cent off corporation tax each year until it reaches 24 per cent (versus 28 per cent now), in order to stimulate business growth. But Osborne said his levy was meant to counteract that effect with regard to banks.
Barclays paid over £1bn in global corporation tax in 2009, versus pre-tax profits of £4.5bn and a £7bn gain from selling Barclays Global Investors, a transaction taxed separately.
BARCLAYS TAX ROW
Q. DID BARCLAYS REALLY PAY ONLY ONE PER CENT TAX IN 2009?
A. No. The bank’s annual report shows that it in fact paid £1.05bn globally in corporation tax in 2009, an effective tax rate of 23 per cent on pre-tax profit from continuing operations, or nine per cent if you count the bank’s one-off £7bn gain from the disposal of Barclays Global Investors, which is not subject to corporation tax. In total, including national insurance, VAT and payroll tax, the bank and its employees paid over £2bn in UK taxes alone in 2009.
Q. SO WHY IS THE BANK’S HEADLINE CORPORATION TAX FIGURE ONLY £113M FOR 2009?
A. The rest of the bank’s corporation tax bill was paid in jurisdictions other than the UK. The bank was also able to offset drastic losses suffered during the previous year against its UK corporation tax, under rules introduced in 2002. It also routed some transactions through offshore centres.