The k2p blog

A case of squirrelling away your losses to avoid taxes when times are good!!

Allowing for deferred taxes to average out the ups and downs of a business cycle makes good sense. But of course such provisions are exploited to the full – especially by the financial “industry”.

Barclays stockpiles ‘losses’ to soften tax obligations

Barclays has amassed a war chest of “losses” to offset against future tax payments that can almost rival those at the crippled state-backed banks, despite remaining strongly profitable.

The European Banking Authority has estimated that Barclays will have €4bn (£3.3bn) of “deferred tax assets” this year, compared with €5bn at Royal Bank of Scotland, and €7.3bn at Lloyds Banking Group.

Deferred tax assets are highly prized by companies because they can be set against tax claims to reduce the final bill.

They are usually created when a company makes a loss and can be held for several years to offset against future profits. However, while RBS and Lloyds made enormous losses in the crisis, Barclays always declared a profit at group level.

Last year, Barclays generated an extra £591m in “tax losses carried forward” despite making £6bn of profits before tax. The tax gain suggests the bank made £2bn of losses, which the bank said “mainly relates to entities in the USA, the UK and Spain”.

The results also revealed that the bank reduced its corporate tax bill by £365m in 2010 to £1.52bn by using deferred tax assets – £205m of which arose “from the reorganisation of Spanish securitisation financing”.

Barclays has run into controversy before over its tax arrangements. Two years ago a whistleblower leaked documents which purported to show that Barclays was using a network of subsidiaries in the Cayman Islands and Luxembourg to reduce its tax bill.

Earlier this year, chief executive Bob Diamond was forced to reveal that the bank operated nearly 300 subsidiaries in tax havens and had paid just £113m of corporation tax in the UK in 2009 – a year in which it handed out £3.4bn in bonuses. ….

Tags: Barclays, Deferred tax, ethics

This entry was posted on January 2, 2012 at 8:19 am and is filed under Business, Ethics. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.