Saga and the AA have paid almost no corporation tax whilst being owned by private equity.

Research by the BBC suggests that the two offset their profits through the interest payable on their debts.

In 2006, the AA made a profit of £252m, wiped out by £222.3m 'finance costs'. Saga told the BBC it had made EBITDA of almost £160, eliminated by interest charges on £1.6bn of debt.

The findings will probably be looked at by the Treasury Select Committee, currently investigating private equity and its tax arrangements. The alleged abuse of the tax system has cause a political row.

Labour MP and head of the committee John McFall said: 'The question is, are the private equity companies using debt as equity?'

'If they are, then they are distorting the system. These are questions that are still to be answered.'

Further Reading

Read Tax Hack on the Saga/AA private equity tax issue

Read the BBC story

Read Robert Peston, BBC Business Editor's blog on the issue