Saturday, February 19, 2011

Bravo Barclays!

Yes, paying £113 million in corporation tax on 2009 profits of £4.85 billion - just 2.4% - is a remarkable achievement for the corporate finance team, who must have been appropriately remunerated for the value they added to the company in structuring the accounts so carefully.

With the new tax rules quietly introduced by this government, it is likely that even less will be paid in future, no matter how much posturing the government does in pretence of getting tough on the bankers.

You see, profits earned outside the UK are taxed at the local rate of corporation tax and only taxed in the UK at the difference (if any) between the UK rate and the rate of the jurisdiction where the profits are made. This government has decided to abolish even that small amount of additional liability, so profits made overseas by companies tax headquartered in the UK will now incur no tax liability at all in this country.

Of course, this all pales into insignificance next to the Vodafone deal, which remains an obscene dereliction of public duty by HMRC in only recovering £1 billion of a £7 billion liability.

All in this together? Yeah, right.


Politunnel said...

This is a bit misleading, Surely this accounting is due to the losses carried forward from 2008, standard practice sadly that neither Brown or balls addressed while at the exchequer and no rumblings of it from Osborne either.

Ladywood Conservatives said...

You do know that the widely quoted figure of 6 billion (which you have increased to 7) is a myth. I am sure you do.

PoliticalHackUK said...

Nobody is saying that this is anything other than legal, but cutting their tax bill in future years is hardly reward for the level of support given to banks. Barclays may not have had the direct support from the government in the way RBS or LTSB have, but they have benefitted from lower borrowing rates because of the ultimate security of the UK government promise.

Vodafone and HMRC deny that there is any outstanding liability or that a £7 billion liability was ever established. Both statements are true.

HMRC have also confirmed that negotiations were carried out with Vodafone and agreement was reached.

They have not denied that a higher start point was originally mooted and it has been suggested that Vodafone expected to settle for around £2 billion, so the final settlement was in their favour.

I don't think we can call it a myth.