Newspaper To Leak Details Of UK Corporate Tax Avoidance
The Independent will this week reveal "how more than 30 UK companies, including some of the UK's most recognizable brands," are benefiting from a legal tax loophole.
The so-called "quoted Eurobond exemption" allows firms to accept high-interest loans from their owners, via the Channel Islands Stock Exchange. The Independent says that "by racking up large interest payments to their parent companies, they are able to reduce their bottom line and cut their tax bills." Because the interest payments are going overseas, and are issued through the Channel Islands, they are able to exit the UK tax-free, rather than attract the usual 20 percent withholding tax.
As the newspaper has explained, "if their owners had provided funds to the companies by investing in shares instead of issuing loans, any dividends would be paid after the companies' profits had been taxed. Other operating expenses could also influence their overall tax bill."
Margaret Hodge, chair of the influential Public Accounts Committee, said of the accusations: "Companies have a duty to pay their fair share of tax relative to the profits they make in this country. Yet it seems every week brings a new revelation of another business that is using artificial structures to move profits out of the UK, seemingly for no purpose other than to avoid tax.
An HM Revenue and Customs spokesman told the paper: "In March last year we ran a consultation to consider aspects of the taxation of interest including the circumstances in which the exemption from withholding tax on quoted Eurobonds would apply. The proposed amendment to the exemption would have applied to companies whether their customers were in the public or the private sector, but in the light of concerns about the possible negative impact on inward investment it was decided to keep this complex area of tax law under review."