Idea about preventing banks from offsetting losses from financial crisis against tax had been floated in opposition

George Osborne has shelved plans that would have forced banks to pay billions of pounds in tax over the next few years, despite Barclays's admission that it paid just £113m in corporation tax in 2009.

It is understood that proposals to prevent banks from offsetting all their losses from the financial crisis against tax have been dropped. The chancellor had floated the idea while he was in opposition.

The ability to deduct past losses against future tax payments is expected to mean many of Britain's biggest companies will avoid paying corporation tax for years. It helped keep Barclays's tax bill down in a year when it rang up £11.6bn in profits.

The revelation about Barclays's corporation tax bill, made in a submission to the Treasury select committee, added fuel to protests organised by anti-cuts campaigners at Barclays branches over the weekend. UK Uncut, which has launched protests at Topshop, Boots and Vodafone, said 50 Barclays branches were affected. At the Tottenham Court Road branch in central London, it said, campaigners occupied the store for two hours while children played and Josie Long performed a comedy gig.

In December 2009 Osborne suggested that one way to make banks make a contribution to society would be to stop them offsetting their losses against tax – a standard practice for the business community.

The chancellor has instead introduced a £2.5bn-a-year bank levy which is harder to avoid and would not penalise the bailed-out Royal Bank of Scotland. Three months ago, RBS revealed it had £5.9bn of such tax losses, some £3.7bn of which related to the UK. On Thursday it is forecast to report losses for 2010 of £700m.

He said banks would pay "more tax, less bonuses and lend more this year than they otherwise would have done". He said Ed Balls had "vigorously opposed" the plan.

• This article was amended on 21 February 2011. The original referred to Vodaphone. This has been corrected.