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The move has been encouraged by regulators but will also allow BofA to benefit from tax breaks stemming from the accumulated losses in its UK business. Bank of America is currently one of the biggest banks in Ireland. Although its domestic Irish operations are small, it has traditionally routed a large chunk of its European operations – corporate lending and cash management as well as the derivatives book – through the Dublin subsidiary.
Bankers said Irish officials had made it clear they were uncomfortable with such a large book of business being Dublin-based, theoretically posing a risk to Irish taxpayers. At the same time, UK regulators were keen to have closer control of Bank of America’s European business, whose operational management is in London.
The process of moving the assets, which requires further regulatory approval and the amendment of client contracts, is expected to take at least until the end of 2013. It will be most tax-efficient before April 5 because the value of the tax losses in the UK business will diminish in line with the falling corporate tax rate.
According to its most recent disclosures, the bank is sitting on more than $8 billion of so-called deferred tax assets in the UK, against which it can offset profits to reduce or eliminate its corporate tax bill.
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