It is I think quite fair to say that a great many people who callled me yesterday afternoon were stunned by the news that Barclays paid just £113 million in tax in the UK in 2009.
And off we go into a discussion of how they’re tax dodging bastards.
Yet we actually know the answer, Ritchie kindly provided it to us only one week ago:
So let’s get back to the one tax the banks do pay as a charge on the income they make – which is corporation tax. As the Mail on Sunday notes today, based on research I did for them, the likelihood that any of our big banks will be paying any serious sums in corporation tax for a while to come is remote in the extreme. That’s because the 2009 accounts of each of the major banks shows just how much deferred tax asset they’re sitting on relating to tax losses that they can offset against their future profits – including those subject to Project Merlin. The figures are:
HSBC _ £4.2 billion
Barclays – £1 billion
Lloyds – £4 billion
RBS – £5.1 billion
Add them together and that’s more than £14.3 billion of tax that’s not going to be paid any time soon. Or at UK current corporate tax rates some £51 bn of profit that needs to be earned before tax is paid.
They made losses which they can carry forward and offset against tax.
There’s no mystery here, just the simple and obvious point that you pay profits tax on your cumulative profits, offsetting losses, as will be true in any not entirely insane system of taxing profits.
15 responses so far ↓
1 Dick Puddlecote // Feb 19, 2011 at 12:38 pm
Think you used the wrong first link, Tim.
Tim adds: Fixed, ta.
2 Noel Scoper // Feb 19, 2011 at 12:54 pm
Barclays should come out and say “we’d pay more tax if we could, but as we have to abide by the law a tax expert tells us there’s no voluntary donation box in tax”
http://www.taxresearch.org.uk/Blog/2010/07/09/right-wing-libertarians-bully-oh-yes-they-do/#comment-577155
3 Alex // Feb 19, 2011 at 2:38 pm
Well, not quite, because losses arise in various pockets and can’t always be set against where future profits arise. Those deferred tax assets might have arisen in a part of the group where they will be set against taxable profits arising in the short term, but they might simply be losses that the group reasonable foresees using at some time in the future when the profits of a particular part of the group improve.
The more likely explanation for the comparatively low amount of corporation tax paid in the UK is that Barclays keeps a high proprtion of its head office functions (accounting, credit, personnel, IT, operations, training) in the UK, plus it has a tax leasing book that gives it a fair amount of capital allowances. Instead of whingeng about how little corporation tax gets paid, the critics should be looking at how much income tax and NI gets paid by Barclays and its employees.
4 Andrew K // Feb 19, 2011 at 3:12 pm
Funnily enough the BBC breakfast programme had someone talking about this very subject this morning. A tax expert, didn’t quite catch his name. Richard somebody or other I think.
5 Kay Tie // Feb 19, 2011 at 3:54 pm
Moronocracy. I’m very tempted to just leave them to it.
6 Philip Walker // Feb 19, 2011 at 6:54 pm
Alex: And this is why I listen to Radio Four. Monbiot was on, banging on about the evils of tax-efficient accounting practices, and only referred to our favourite retired tax accountant as ‘some experts’. (That’s Richard Murphy of TRUK, Richard Murphy of the TUC and Richard Murphy formerly of TJN, I’m guessing.) I don’t believe they let the man himself near a microphone, probably because he would manage to discredit the entire project for R4 listeners.
On a very much related subject, Evan Davis v. Chuka Umunna was a most entertaining listen this morning. He blew Umunna out of the water and Umunna was too dense even to realise it.
7 Philip Walker // Feb 19, 2011 at 6:54 pm
Sorry, that should have been to Andrew, not Alex!
8 ukcuts // Feb 19, 2011 at 7:20 pm
This is comedy gold from the very same Richard Murphy who was in the BBC this morning.
This is also genius http://www.guardian.co.uk/money/tax-gap-blog/2009/feb/02/tax-gap-guardian
How can anyone take this hypocritical moron seriously?
9 The Pedant-General // Feb 19, 2011 at 7:26 pm
I know these things aren’t quite that simple, but how big were Barclay’s losses in 2008?
i.e. how much loss have they carried forward and what is therefore the net amount of profit upon which CT is payable?
10 The Pedant-General // Feb 19, 2011 at 7:38 pm
OK see here:
http://www.barclaysannualreport.com/ar2009/index.asp?pageid=30
Don’t know where the £113m number comes from. The accounts are pretty explicit.
Continuing businesses:
PBT: £ 4,585 m
Tax: £ 1,074 m
That a rate of 23.4%. Seems about right.
Then, the big kicker is profit on disposal of businesses:
Op Profit: £ 726 m
Profit on Disposal: £ 6,331 m
PBT: £7,057 m
Tax: £ 280 m
That’s the one that looks odd, but I’ll bet there is something odd in the fact that it is a disposal and I can’t see a loss being carried forward – it’s more to do with write downs, but can’t see why that’s reported as profit.
However, the accounts are clear on the tax treatment here:
http://www.barclaysannualreport.com/ar2009/index.asp?pageid=66
(and scroll down to near the bottom)
This idea that only £113m CT was paid this year is just shite. Complete shite.
11 The Pedant-General // Feb 19, 2011 at 7:41 pm
Oh and our favourite WGCE really damned well ought to know that if these numbers are wrong in anyway whatsoever, the auditors get hauled over the coals and the Directors go to jail.
The auditors have to check everything that is published and that definitely includes the presentation of accounts on the web, not just in the annual accounts.
12 Christie Malry // Feb 19, 2011 at 8:07 pm
“The auditors have to check everything that is published and that definitely includes the presentation of accounts on the web, not just in the annual accounts.”
Nah, they don’t. Their responsibility extends only as far as what’s in the printed set. Some of them even have special disclaimers in the web version of their audit report to make it clear that they haven’t checked the web numbers at all.
13 Alex // Feb 19, 2011 at 9:52 pm
@Pedant General
The low tax on the sale of a wholly owned subsidiary as a going concern qualifies for the “Substantial Shareholding Exemption” (i.e. tax-free).
That was dreamt up by a Mr G Brown because his private equity pal Mr R. Cohen, told him it would stimulate investment in the UK, but Mr Brown didn’t figure out that actually this particular quirk favours sellers more than it favours investors.
14 @UKcuts // Feb 19, 2011 at 10:53 pm
And the comedy keeps coming
http://www.taxresearch.org.uk/Blog/2011/02/19/the-conspiracy-against-the-public/
15 FCAblog » The five howlers made by The Guardian in reporting tax paid by Barclays // Feb 20, 2011 at 10:33 am
[...] (HT here to Alex, who first commented on this over at Tim Worstall's blog) [...]
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