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Barclays avoids £2bn in taxes by booking profits in Luxembourg



Barclays was able to avoid paying high taxes thanks to booking in Luxembourg the profits from the $15.2bn sale of Barclays Global Investors (BGI) which was headquartered in the UK. Photo: Shutterstock

Barclays was able to avoid paying high taxes thanks to booking in Luxembourg the profits from the $15.2bn sale of Barclays Global Investors (BGI) which was headquartered in the UK. Photo: Shutterstock

Banking group Barclays has avoided paying almost £2bn in taxes by booking the profits of a 2009 transaction through Luxembourg and benefitting from a generous agreement, according to a report by the Guardian.

The UK-based banking group has paid less than 1% in taxes (£46m) since 2013, with its Luxembourg office having made £6.6bin in profits, estimates the British publication. It was able to do so thanks to booking the profits from the $15.2bn sale of Barclays Global Investors (BGI), which was headquartered in the UK, in Luxembourg. The structuring of the sale allowed Barclays to generate a tax loss from a tax-exempt transaction, something that is not possible in most countries.

“We paid no corporation tax in Luxembourg in 2021 as our taxable profits were offset by substantial tax losses brought forward from prior years, and also due to dividend income not being taxable under Luxembourg law,” reads Barclays’s 2021 annual report.

“These revelations that Barclays is using a scheme in an infamous tax haven leaves the British-headquartered bank with important questions to answer,” senior labour MP Margaret Hodge told the Guardian.

These revelations suggest that profits could have been shifted from the UK to Luxembourg with Barclays avoiding a not insignificant tax payment. The Guardian estimates that the banking group has saved up to £1.8bn in tax and says it could have been taxed between 25% and 30% instead of 1% had it not benefitted from the 2009 agreement.

“The structure of the BGI sale was not aimed at securing a tax reduction but intended to secure a simpler and more certain tax treatment and avoid volatility in the bank’s regulatory capital,” stated Barclays in a statement.

Barclays has 54 employees in Luxembourg, 46,000 in the UK and nearly 10,000 in the US with the branch in the grand duchy lining up as the third most profitable office of the banking group with turnover of £1.1bn in 2021.

Updated on 10 May at 18:29 to clarify the number of staff members in Barclays’ Luxembourg branch.