The giant American investment bank, which employs thousands in the City, has made losses of $29bn (£15bn) for its exposure to the US subprime mortgage crisis. But it has charged the amount to its British arm, meaning it can offset the losses against corporation tax for decades to come.
Accountants say that the move, which is set to spark anger among ordinary taxpayers, is legal but unusual. All big banks have suffered from dramatic writedowns on investments linked to the US housing market but so far Merrill is the only one to charge the entire loss to the UK. The move will reduce payments to the Government at a time when its finances are in disarray. It will also raise eyebrows in the City and cause consternation at the Treasury.
The paper calculates that if Merrill starts making profits again at the rate it did in 2006 - a record year - it still won’t have to pay any corporation tax for the next 60 years.
