Barclays has avoided nearly 2.5 billion dollars in tax via a lucrative arrangement in Luxembourg that allowed them to pay less than 1% on profits in the country for more than a decade.

A Guardian analysis of Barclays’ tax bills shows it is still benefiting from a controversial decision in 2009, in which it profited from the $15.2bn sale of a fund management business in Luxembourg rather than in the UK where it’s headquarters are located.

By booking the profits overseas, Barclays was able to take advantage of a complex scheme in which it could offset future profits against a drop in the value of company shares it acquired as part of the deal.

The decision has resulted in Barclays earning billions of British pounds nearly tax-free for more than 12 years, and has raised questions about whether it influenced the bank’s strategy in investing or growing the Luxembourg business at the expense of other locations, including the UK.

The senior Labour MP Margaret Hodge said: “These revelations that Barclays is using a scheme in an infamous tax haven leaves the British-headquartered bank with important questions to answer.

“Why is Barclays setting up shop in Luxembourg at all, other than to avoid tax? Does this artificial financial arrangement mean that profits are shifted away from the UK, thus harming our tax coffers? Or have business investments been channelled through this tax haven instead of in Britain, harming our economy in the process?”

Barclays employs only 54 staff in Luxembourg, but it is currently the bank’s third most profitable jurisdiction behind the US and UK, with turnover of 1.35 billion dollars last year. Low staff costs mean Barclays can turn nearly all of that income from corporate and investment banking into profit.

The bank has 46,000 staff in the UK and nearly 10,000 in the US.