Lloyds Banking Group is to be investigated by UK tax authorities following allegations by a BBC Panorama programme that it was encouraging wealthy individuals to avoid taxes by investing offshore.
A BBC film crew secretly recorded a Lloyds employee at its Jersey branch recommending that a man posing as a client, with £4m to invest, channel the funds through China, the BBC said.
The Panorama show in question, entitled Banks Behaving Badly, is due to air tonight in the UK on BBC One at 8:30pm.
Lloyds responded to the allegations with a strongly-worded statement of the seriousness with which it treats “our obligations to comply with all tax legislation”, and said that it believed that it had done so.
The statement said: “We take these allegations by Panorama very seriously, and a full and comprehensive investigation into this matter is already under way.
“The member of staff has been suspended pending the outcome of our investigation. If the investigation concludes that serious misconduct has occurred, then the company will take the appropriate disciplinary action.”
‘The bank bailed out by taxpayers’
In a news report of the incident on its website today,the BBC refers to Lloyds as “the bank bailed out by taxpayers”, a reference to last year’s £17bn rescue of the FTSE 100-listed institution by the UK government.
Lloyds Group is the giant financial entity formed by the taking over by Lloyds TSB of Halifax Bank of Scotland (HBOS) in a £12.2bn merger.
“During the secret filming, the employee at the branch of Lloyds TSB Offshore told the undercover customer that income earned on deposits made in the tax haven is paid to clients via Hong Kong to ‘get round’ the European Savings Tax Directive," the BBC website story, written by Panorama veteran journalist John Sweeney, says.
Sweeney writes that the banker, who was not named in the article, told its undercover "millionaire": “It’s of no interest to us whether you tell the tax man or not. It’s not our business."
‘Irresponsible’
The BBC quotes HMRC permanent secretary Dave Hartnett as saying that the advice alleged to have been given to the undercover reporter by the Lloyds employee was “an incredibly irresponsible thing for [the Lloyds employee] to have said”.
“We might interpret that to mean he was so reckless that he was giving his client a signal that he didn’t have to make a return of income. Were we to find that happening we would take a very dim view of it," Sweeney writes, quoting Hartnett.
Sweeney notes that other banks helped by the UK government are “also continuing to do business off-shore in traditional tax havens”, including Northern Rock, bailed out to the tune of £27bn in 2008.
Fund transfers ‘normal’
In its response, Lloyds noted that the transfer of funds to and between subsidiaries “is a normal business activity for large companies”, and that the transaction referred to in the Panorama report involved Lloyds operations in the Cayman Islands and British Virgin Islands, "where the legal framework with regard to repatriation of capital…is more flexible than the legal framework for UK companies”.
“The transfer involving the British Virgin Islands subsidiary was made based on guidance from the FSA on their new rules relating to the funding of non UK subsidiaries by banks,” the Lloyds statement added.
It also said the FSA had been notified of the transfer shortly after it took place.
