Swiss bank UBS in £100m dispute with UK taxman

Revenue’s bid to curb big groups cutting bills with crisis-era losses

SWISS banking giant UBS is embroiled in a £100 million dispute with Revenue & Customs over an attempt to book losses from its Swiss parent in the UK.

The row shines a spotlight yet again on the battle between international groups and the Government over the question of where companies can book profits and losses to minimise their taxes.

The skirmish is the latest in a long-running dispute with the taxman over losses suffered by banks during the financial crisis. Banks have billions in losses stored up which they can offset against future profits to cut their tax bills – in some cases for decades.

Companies have long offset losses from the past to reduce their tax bills, but the Treasury has moved to limit the rate at which banks can claim them because hefty losses from 2008 have been drastically reducing the income from corporation tax.

UBS bank operates in the UK through a limited company as well as a branch of its Swiss parent. Official filings for the limited company show its financial statements are prepared on the basis it can ‘offset part of its taxable profits against losses transferred from [parent company] UBS AG’.

The bank’s report added: ‘During 2016, HM Revenue & Customs indicated that they do not agree with this tax return filing position.’

If UBS loses the dispute it will have to write a cheque for £57million in bills due from 2014 onwards and will also not be able to claim £46million of tax benefits in the next few years.

In addition, it hopes to claim back £1.8billion against bills in the longer term – but at least some of that sum is at issue in the same Revenue & Customs dispute. The bank declined to comment last week.

It is unclear if the losses were originally

incurred in London. UBS employs about 5,000 staff in the capital. Just 62 work for the UK subsidiary while the vast bulk are thought to be employed at the branch of the Swiss parent.

UBS Limited made pre-tax profits of £197million in the year to the end of December 2016, compared with £189 million for the previous year.

Former Chancellor George Osborne decided in 2014 to allow banks to use losses to offset against just half their profits in any one year. He reduced it in March last year to permit losses to be offset against a quarter of profits. Treasury figures suggest the latest restriction will increase revenues by £500million this year.