Lloyds Banking Group is facing a £1 billion bill after a tax tribunal ruled against it in a dispute tied to losses in Ireland dating back nearly 15 years.
The First-tier Tribunal Tax Chamber has dismissed the lender’s appeal against HM Revenue & Customs’ stance that Lloyds incorrectly claimed £3.8 billion in tax relief linked to its Irish operations, which were wound down following the 2008 financial crisis.
The case stems from the rescue of HBOS by Lloyds in 2008, a deal orchestrated by the government during the banking turmoil. Within two years, the Bank of Scotland’s Irish unit—part of HBOS—was shut down after racking up heavy property loan losses. Lloyds, led by chief executive Charlie Nunn, has long challenged HMRC’s assessment, which it first disclosed in 2012, warning then that it could face a £1 billion demand.
A spokesperson for Lloyds said the group “respectfully but fundamentally disagrees with the tribunal’s decision” and will appeal. If further appeals fail at the Upper Tribunal and higher courts, Lloyds could eventually have to pay the full amount sought by HMRC.
It is an unwelcome setback for Britain’s biggest domestic bank, which is already grappling with another potential financial hit—this time in its motor finance division. The group has set aside £450 million to cover customer redress after the Financial Conduct Authority launched a review into potential mis-selling in the car loans market. That investigation intensified in October when the Court of Appeal ruled in a separate case involving MotoNovo Finance and Close Brothers, potentially exposing lenders to tens of billions of pounds in liabilities.
The Supreme Court is due to hear an appeal in April, with the government seeking permission to intervene amid concerns over the potential regulatory fallout. Nunn has welcomed the government’s involvement, as the outcome could have industry-wide implications for motor finance.
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Lloyds braced for £1bn tax clash in Ireland losses row