(Credit: William - stock.adobe.com)

The move, worth £99 million to Lloyds, comes as HMRC awards a new £334m, 12-year contract to a consortium of Lloyds, RBS-owner NatWest, and Citigroup.

The decision follows a procurement process run by Government Banking, which manages payments for UK government agencies and public bodies. Lloyds will take over “lot one”, handling general banking services previously provided by Barclays. NatWest and Citi will retain their respective “lots”, covering other general banking and foreign exchange services, Financial Times reports.

This change represents a blow to Barclays, which faced prior criticism from environmental campaigners over its fossil fuel financing. Additionally, the bank experienced a major service outage earlier this year, impacting customers attempting to meet HMRC’s self-assessment tax return deadlines.

HMRC emphasised that its contract awards adhere to government procurement rules, prioritising value for taxpayers. While service description and costs hold the greatest weighting, social value and environmental credentials are also considered, accounting for 10% and 7.5% of the tender evaluation, respectively.

The new contract is significantly larger than the previous agreement, reflecting an increased need for banking services. HMRC stated it regularly reviews contracts to ensure best value. While environmental campaigns against Barclays’ practices were noted, sources suggest the contract change was primarily driven by the standard procurement process. Barclays will continue to provide merchant acquiring services to HMRC outside of this agreement.