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‘Tax-dodge factory’ lands Barclays in political row
Hugo Duncan18 Mar 2009
Barclays was today engulfed in a political storm over tax-dodging schemes which save the bank and its clients hundreds of millions of pounds.
A whistleblower described how Barclays has a team of high-powered tax experts at its offices in Canary Wharf who are paid handsomely to cook up legal ways to avoid tax all over the world.
The revelations sparked outrage in Westminster and beyond as the bank continued talks with the Government over a possible state bailout. It also came as Gordon Brown and other G20 leaders proposed crackdowns on tax havens.
Barclays won an injunction in the early hours of this morning to stop The Guardian publishing further damaging documents, but the whistleblower's testimony was not covered by the ruling.
Lifting the lid on the London operation — dubbed a “tax-avoidance factory” by the City — the informant told Liberal Democrat deputy leader Vince Cable: “Hidden away on the top floor of 5 The North Colonnade sit the formidable SCM (Structured Capital Markets) team. A team of some 110 people with the sole purpose of structuring tax-aggressive transactions to avoid tax not only for Barclays but also for banks and companies across the world.
“Once the story was about avoidance of UK tax. This rapidly expanded into avoidance of US tax, too. Now the business has grown to encompass Europe, Brazil, the Middle East, South Africa and other emerging markets.” He added: “Where the world sees turmoil and destruction, the leaders of SCM see opportunities arising from tax-loss exploitation and corporate restructurings, throwing up all sorts of new and juicy areas of the tax code which can be profitably exploited.
“For the last 10 years the SCM team has generated a formidable amount of profit, peaking in the last few years at circa £1 billion per annum.”
Barclays said the claim it makes £1 billion out of tax avoidance “is absolute nonsense”. A spokesman said: “Barclays does not encourage or condone tax evasion. We comply with taxation laws in the UK and the other countries in which we operate. We have long maintained an open and transparent relationship with HM Revenue and Customs.”
The bank in talks with the Government about a possible state bailout through insurance of billions of pounds of toxic assets. Analysts reckon Barclays could ringfence up to £80 billion of assets.
Liberal Democrat leader Nick Clegg, who was holding talks with Barclays chief executive John Varley this afternoon, said: “At a time when banks are receiving massive support from the Government, the public has a right to know if those same banks are also trying to avoid paying their tax bills.
“Barclays is negotiating for substantial Government backing. The Government must make it an absolute pre-condition that tax avoidance at the expense of the taxpayer should stop.” HMRC has launched an investigation into the allegations, and Chancellor Alistair Darling said a draft code of practice on taxation for banks will be published by the time of the Budget next month.
But the whistleblower said HMRC officials on £45,000 a year “will always be behind the curve” and claimed “no other tax-arbitrage team has the financial resources or the senior management support from the very top that the SCM team enjoys at Barclays”.
He was also disparaging about his former colleagues. “Normally a man who has made the study of the Taxes Act and the accounting legislation a priority above all other things in life would be looked upon with some surprise,” he said. “But within SCM these men are Masters of the Universe commanding multi-million-pound bonuses and publicly humiliating those of lesser knowledge.
“These men are not the types who will light up a party and tend only to be able to communicate through snorts and grunts whilst thumbing the pages of Tolley's Yellow Tax Handbook.”
Reader views (13)
Message to the proletariat:
Government exists solely for the protection and projection of the ruling class.
- James Blunt, Manchester, 18/03/2009 00:06
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I just wish SOMEONE at Barclays would pick up the phone and answer an urgent question about my account. Or they might even have the decency to answer the letter I wrote. Or they might explain why they "lost" a large money transfer a few years ago-TWICE. However.............
- Ray King, wood green and kassel germany, 17/03/2009 23:58
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For heavens sake, tax avoidance is the right of every person. If you overpay your tax, the authorities will never tell you. They have put in place so many incentives schemes and deductions and twisted the idea of tax so far, that no ordinary person can keep pace with what is legal. These guys are finding out how to legally pay the least tax and I am sure that everyone at every level of taxation would like to avoid paying more than is required.
- Coylum, vancouver, Canada, 17/03/2009 21:55
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Capitalism isn't worth saving. It locks them up downstairs and demands they keep producing and all the while they steal funds to feed the rich feasting upstairs in the sun rather than those wasting their years away in some God forsaken basement of a factory or office. Capitalism is mouldering in his grave and it has no truth to go marching on. The sooner it has a stake driven through its heart the better for all concerned, upstairs and downstairs.
- John, Aberdeen, UK, 17/03/2009 17:28
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The big question now is whether Barclays will be able to avoid the Asset Protection Scheme. If they can not, I am hoping that the Treasury will demand a severe price, to be paid for in Barclays shares. Anything else will not only be letting the taxpayer down but also send the wrong message out to the Global financial industry.
- Harry H, London UK, 17/03/2009 17:21
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If you or I were to underpay £1 of tax or receive £1 too much in benefit you can be sure that HMRC would be spending a lot of time and money fining/prosecuting us but with the banks the Government just give them more and more money to bail the banks out (and Barclays doesn't want the government/tax payer to be a shareholder as a result of such a bail out and went overseas for investment funds) and to pay bankers high bonuses/pensions and doesn't seem to care that they haven't paid full tax for years.
- Anon, London, 17/03/2009 17:20
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all financial companies throughout the world must be treated the same - controls and taxed as equal....
- Graham Grimshaw, Ruislip Uk, 17/03/2009 16:40
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Sounds like good business practice to me.
- Dave Davies, Basingstoke, Hants, 17/03/2009 15:14
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Sandy,
"...keep on with the British Banker Bashing and we'll be picking through the rubble of the one thing this country is good at."
Are you having a laugh?? Let them go. Please! Bring Dubai to its knees - or to its ankles as it seems Dubai is already well up the creek!
- Gc, London, 17/03/2009 15:11
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Dubai is poised and waiting for London to fail. You don't think they spent trillions on developing Dubai just for tourisim. They are twix east and west and are already waiting to accept the World's financial and insurance organisations.
So yes, keep on with the British Banker Bashing and we'll be picking through the rubble of the one thing this country is good at.
- Sandy, London, 17/03/2009 13:45
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Big organizations and the wealthy have always used what the man in the street would call "dodgy methods" to ensure they pay as little tax as they can but of course they say that they are just using the tax rules.
- Mike Melbourne, Bedford England, 17/03/2009 13:06
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Labour shied away from taxing bankers at the same rate as the rest of us because they believed that "this enormous talent" would re-locate to other countries, along with their companies, leading to mass redundancies in the UK.
Don't expect the situation to change any time soon, at least as long as this shower are still in charge.
- Nobby Clark, Perth, Scotland, 17/03/2009 11:52
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The simple answer to this industry is a ‘flat rate of tax’ it just works on some many levels.
- Dave, herts, 17/03/2009 09:53
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