A UK company which forms part of one of the world’s largest oil trading multinationals is paying 80 percent of its profits to another part of the multinational in the low-tax Swiss canton of Zug — shrinking its taxable profits in the UK.
Our new report reveals that these multi-million-pound tax-deductible payments by Glencore Energy UK Ltd are still continuing, unmodified, to the present day – fifteen years after HMRC first alleged that they constituted artificial tax avoidance. The tax and interest at stake in the case now stands at over £1.5 billion, and increased by £620 million during 2025 alone.
TaxWatch’s investigation – using court records, accounting analysis and new information from the company itself – provides the first full details of what is now one of the UK’s largest tax cases. Since its Swiss payments began in 2009, Glencore Energy UK Ltd — which handles much of Glencore’s oil trading business — has booked nearly $1 trillion (£730 billion) of revenue in the UK, declared a pre-tax profit margin of less than 0.05%, and declared tax liabilities of just £57 million.
The case itself may seem technical, but the dispute is stark. HMRC has claimed that the portion of the fees paid to Switzerland for ‘non-routine services’ – services other than storage and transport facilities actually provided and charged at market rates – were not simply overpriced, but should be valued at zero. When it sent the company its first Diverted Profits Tax (DPT) bill back in 2016, HMRC claimed that Glencore “has not provided evidence of actual services provided, benefits received by [the UK company] and pricing”. As a subsequent court judgement records, when Glencore challenged this initial tax bill it provided simply “a one page appendix…which gave examples of services provided….No details were provided. No calculations were provided for the value of these services.”
(Glencore told TaxWatch that it has since provided HMRC “with many hundreds of pages of explanation and documentation supporting the substantial contribution of [the Swiss subsidiary] to [the UK subsidiary’s] ability to conduct its business”. It rejects HMRC’s characterisation of its Swiss transactions as artificial profit diversion, and disputes HMRC’s tax charge in full. There is no suggestion that Glencore has acted unlawfully or fraudulently).
When TaxWatch began researching this giant tax case last year, we were astonished by the amount of revenue at stake in relation to a single company. But we couldn’t have predicted that an attack on Iran would close the Strait of Hormuz and precipitate a global oil price shock that could fuel even higher profits at the very same company.
This year’s unprecedented energy supply crisis puts the potential cost of this frozen dispute into sharp relief. On Thursday Glencore released quarterly results showing that its marketing division, which includes the London-based oil and gas trading operation at the heart of this tax dispute – is expected to see profits this year “comfortably exceeding the top end of our long-term Adjusted EBIT guidance range”. Bloomberg News put it more succinctly: “Glencore Traders Score Big Profits As War Rattles Energy Markets“.
And because its UK tax dispute still hasn’t been settled after 15 years, windfall oil trading profits that the company may make from the oil market chaos of 2026 can also be paid out to Switzerland, increasing the public revenue at stake in the case even further. While our fuel bills go up, a £1.5 billion tax bill levied on one of the world’s biggest oil traders remains unsettled.
How can this still be happening?
Our report sets out to answer a simple question: why has this company’s £1.5 billion tax bill still not been settled after 15 years?
The answer to this question is both complex and simple. Over the past decade, successive UK governments have changed treaties and UK law to make it easier for large companies to settle alleged international tax avoidance through informal negotiations and secret arbitration, rather than have UK courts decide whether tax is due in the UK.
That’s not, of course, how HMRC would describe it. They argue that these less formal international processes, called mutual agreement procedures (MAPs), don’t replace the resolution of disputes between taxpayers and HMRC, but instead simply resolve disagreements between states over the rights to tax cross-border income and transactions.
However, this ignores the reality of such negotiations, particularly with low-tax jurisdictions. They are initiated at the request of a taxpayer, not the tax authorities. And in cases involving cross-border transfers of profits, the allocation of taxing rights between the UK and a low-tax jurisdiction is in large part the dispute with the taxpayer. (In the case of Glencore, should the huge trading profits generated by Glencore’s London-based oil traders be taxed in the UK or Switzerland?)
As one international tax lawyer (unrelated to this case) described the process to researchers in 2021, companies demand MAPs “to try to force [the country] to see sense. We’re using MAP as a tactic to force [the tax authority] to be more reasonable.”
And HMRC seems to recognise this risk too. HMRC publicly insists that tax treaties do not cover the Diverted Profits Tax (DPT), which makes up the majority of Glencore’s giant tax bill, and that MAPs therefore do not apply to DPT assessments.
Yet this is exactly where the Glencore case has ended up.
- In November 2017 the UK’s Court of Appeal found that HMRC’s decision to strike out the majority of the Swiss payments for tax purposes “was clearly a rational one”, and that the UK tax courts should settle the dispute.
- In 2019 the case duly arrived in the UK’s First-Tier Tax Tribunal. However, Glencore then asked the Swiss tax authority to pursue the case – including its DPT element – in a Mutual Agreement Procedure (MAP) with HMRC, under the terms of the UK-Switzerland tax treaty.
- Despite HMRC’s public insistence that treaty processes like MAPs do not apply to the DPT, one part of HMRC, responsible for international tax relations, then wrote to Glencore that its case was “most definitely within MAP” and that it was in theory “willing to discuss” Glencore’s MAP request with the Swiss tax authority if the UK court case was withdrawn, resolved or suspended. Yet when the case reached court, HMRC opposed Glencore’s application to suspend the court case to allow it to move to a MAP.
- Citing HMRC’s own letter, however, the UK court rejected HMRC’s objection, allowing the case to move to informal closed-door negotiations between tax authorities. HMRC did not appeal this decision.
Quicker, simpler?
The UK government argues these informal methods reduce revenue risk and speed things up. In Glencore’s case, however, they’ve led to the company’s continually growing tax bill sitting in closed-door negotiations for over six years – far beyond HMRC’s target of 24 months for resolving such cases.
And as TaxWatch’s investigation reveals, there’s now a more controversial challenge to the UK’s tax sovereignty in this case. From May 2026 the company will be able to require that a private panel of unnamed foreign arbitrators determine the case, deciding whether the bulk of its trading profits should be taxed in the UK or in low-tax Zug.
Under rules for such ‘mutually binding arbitration’ agreed between the UK and Swiss tax authorities in 2021 — with the Glencore dispute already underway — the company can require that the deliberations and decision of this panel remain entirely secret. The panel’s members cannot be officials or judges of either country. They can impose an all-or-nothing ‘baseball’ decision, binding on the UK government, in which HMRC risks losing its entire claim – potentially requiring HMRC to repay up to £1 billion of tax to the company.
A bigger issue
Why would the UK give away the right for UK courts to determine whether UK tax is due in the UK? Some large businesses strongly prefer mandatory binding arbitration to open courts, and have lobbied for governments to mandate it through international tax agreements. The UK is not unique is agreeing to — and indeed promoting — businesses’ access to such secret, private dispute resolution mechanisms. But it remains in a minority. Only 34 of the 110 countries that have signed the OECD’s 2015 Multilateral Convention on tax treaties have agreed to binding arbitration, with others regarding it as an unacceptable loss of sovereignty.
It might be thought that the bruising experience of the Glencore case could have tempered the UK’s enthusiasm for these informal, closed-door channels of negotiating and arbitrating corporate giants’ diverted profits tax bills.
Far from it: a little-noticed measure in the 2026 Finance Act, passed last month, is explicitly designed to ensure that in the future, multinational taxpayers which HMRC assesses are diverting profits artificially to low-tax jurisdictions can definitely access such closed-door negotiation and arbitration channels in Diverted Profits Tax cases: the same channels that HMRC opposed (unsuccessfully) in Glencore’s case. The total size of the tax at stake in all such diverted profits cases has risen by over £1 billion since 2022, and in March 2025 (the latest available figures) stood at £3.5 billion.
Unilateral disarmament?
There’s a larger point here too. HMRC insists that the era of multinationals’ aggressive tax avoidance is over. This view justifies HMRC’s ‘cooperative compliance’ approach to the UK’s largest businesses, which is very different to how ordinary taxpayers and small businesses are handled. Available powers and penalties sit unused on the statute book, and litigation is extremely rare.
Some big companies have undoubtedly changed their tax behaviour in recent years. But looking at cases like Glencore’s tax dispute, should we be asking whether HMRC has ‘defanged’ itself when dealing with large companies that don’t engage with cooperative compliance?
After all, imagine a small business had for years been paying 80 percent of its profits as tax-deductible service fees to a company its owner had registered in Switzerland, and HMRC claimed that when asked to provide evidence of having received those services, it could only provide a one-page summary of the kinds of services provided. Whether or not that were actually the case (and Glencore insists that the profit split is for real value generated by its Swiss subsidiary, underpinned by real documentation), it nonetheless seems unlikely that — in a matter of this seriousness — the small business could expect that its tax bill would still be under informal closed-door negotiations fifteen years later.
Parliament’s Public Accounts Committee is currently examining HMRC’s record of ensuring large businesses’ tax compliance. So far the picture has been overwhelmingly positive. When it hears evidence from companies and tax officials later this month, perhaps it’s time for some questions about how this case has ballooned to billions of pounds of public money at stake; and whether such cases should really be turned over to private, secret settlements.
Photo by Shaah Shahidh on Unsplash
