Does Richard actually read his own blog?

Today:

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 comments on “Does Richard actually read his own blog?

  1. 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.

  2. 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.

  3. 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.

  4. 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?

  5. 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.

  6. 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.

  7. “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.

  8. @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.

  9. Pingback: FCAblog » The five howlers made by The Guardian in reporting tax paid by Barclays

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