The controversial £5.7m "tax equalisation" cost to relocate Bob Diamond from New York to the Canary Wharf headquarters of Barclays Bank is even more complex than it first appears.
Diamond had been a resident of London for 20 years – taking British citizenship, no less – before Barclays moved him to the US in 2008 following the acquisition of the Wall Street operations of Lehman.
But by January 1 2011 he was moving back to London to become chief executive. His complex employment arrangement promises to make him "harmless for any incremental tax liability incurred as a result of your return to the UK to perform your assignment".
This promise amounted to a £5.7m payment to the exchequer in 2011, but economist Richard Murphy, of Tax Research UK, reckons that "Barclays are in a situation where they are paying tax on tax".
The paying of Diamond's tax is most likely a taxable benefit. On that basis, his original real tax liability was probably less than £2.5m, but the bank's bill has been escalated to £5.7m by the need to cover Diamond's income tax and national insurance on the benefit – and to pay employers' national insurance too.
Barclays freely admits that the "tax equalisation" promise will continue, at least into next year. It's complicated – and very expensive.
