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Barclays rumbled again
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http://www.thisismoney.co.uk/investi...0&in_page_id=3
Barclays hit by huge bill for tax ploy
Richard Brooks, Mail on Sunday
21 October 2007, 9:28am
An attempt by Barclays to dodge tax on its controversial payment protection insurance business has backfired and the bank has been hit with a £300 million bill.
Barclays had set up two companies in Dublin to write its PPI business in the hope of paying Ireland's 10% corporation tax rather than the 30%charged in Britain. But accounts filed for the two companies reveal that this ploy has been rumbled - leaving Barclays with a huge tax hit. The enormous additional payment will shock investors, already stunned at the bank's failure to win the takeover battle for ABN Amro.
When customers of Barclays and its Woolwich and First Plus divisions take out insurance on loans and credit cards, unknown to most of them they are signing an agreement with Barclays Assurance (Dublin) Ltd and Barclays Insurance (Dublin) Ltd.
Over the past ten years, PPI has proved extremely profitable for Barclays. In the year to last October, the Irish companies' combinedreported profits were more than £200 million. Under special tax rules for Dublin's International Financial Service Centre, designed to attract foreign investment, these profits are taxed at just 10%.
International rules to prevent tax avoidance, however, say that Barclays' UK operations must be paid a commercial commission for the service of introducing customers to the Irish companies. A Revenue & Customs investigation has established that this rule was not followed. The increase in the commission means that the Irish companies' profits can be reduced correspondingly.
Under a tax agreement between London and Dublin, this means the Irish companies can claim back tax 'in the region of £75 million to £110 million'. The additional commission must therefore have been about £1 billion, on which the extra UK tax was about £300 million. News that Barclays has not been paying its full dues on one of its most lucrative business lines will inflame the PPI row.
The Financial Services Authority last month described the PPI market as a ' protection racket'. Earlier this year Barclays was exposed by thisismoney.co.uk, for floutingrules on repaying cancelled policies.
Barclays said: 'We manage our tax affairs in accordance with the rules and regulations of the territories in which we operate and these are reported appropriately in our accounts. Discussion about tax inquiries should be directed to the relevant tax authorities and are not for Barclays to comment.'
:carrot::whip::dance:
msl:http://www.thisismoney.co.uk/investi...0&in_page_id=3
Barclays hit by huge bill for tax ploy
Richard Brooks, Mail on Sunday
21 October 2007, 9:28am
An attempt by Barclays to dodge tax on its controversial payment protection insurance business has backfired and the bank has been hit with a £300 million bill.
Barclays had set up two companies in Dublin to write its PPI business in the hope of paying Ireland's 10% corporation tax rather than the 30%charged in Britain. But accounts filed for the two companies reveal that this ploy has been rumbled - leaving Barclays with a huge tax hit. The enormous additional payment will shock investors, already stunned at the bank's failure to win the takeover battle for ABN Amro.
When customers of Barclays and its Woolwich and First Plus divisions take out insurance on loans and credit cards, unknown to most of them they are signing an agreement with Barclays Assurance (Dublin) Ltd and Barclays Insurance (Dublin) Ltd.
Over the past ten years, PPI has proved extremely profitable for Barclays. In the year to last October, the Irish companies' combinedreported profits were more than £200 million. Under special tax rules for Dublin's International Financial Service Centre, designed to attract foreign investment, these profits are taxed at just 10%.
International rules to prevent tax avoidance, however, say that Barclays' UK operations must be paid a commercial commission for the service of introducing customers to the Irish companies. A Revenue & Customs investigation has established that this rule was not followed. The increase in the commission means that the Irish companies' profits can be reduced correspondingly.
Under a tax agreement between London and Dublin, this means the Irish companies can claim back tax 'in the region of £75 million to £110 million'. The additional commission must therefore have been about £1 billion, on which the extra UK tax was about £300 million. News that Barclays has not been paying its full dues on one of its most lucrative business lines will inflame the PPI row.
The Financial Services Authority last month described the PPI market as a ' protection racket'. Earlier this year Barclays was exposed by thisismoney.co.uk, for floutingrules on repaying cancelled policies.
Barclays said: 'We manage our tax affairs in accordance with the rules and regulations of the territories in which we operate and these are reported appropriately in our accounts. Discussion about tax inquiries should be directed to the relevant tax authorities and are not for Barclays to comment.'
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