Ryanair launches tax spat with Aer Lingus

AN UNEXPECTED tax bill for Aer Lingus has developed into a spat with its rival Ryanair.

Yesterday Aer Lingus revealed a €32.5m (£27.8m) exceptional tax and interest provision relating to a review of redundancies undertaken in 2009.

In a twist to the story, Ryanair has issued a stock exchange statement questioning the decisions made by Aer Lingus during the process.

The list of questions is badged by Ryanair as "...Very serious questions, which all Aer Lingus shareholder are entitled to receive answers to..."

One of the ten questions includes: "Why did Aer Lingus believe that it had no tax liabilities for the original deal?"

Yesterday Aer Lingus said it was "deeply disappointed and frustrated" that the group must provide the provision.

Redundancy plans had been agreed between Aer Lingus and unions in 2008, which included a deal that severance payments would qualify as redundancy under Irish legislation - with related rebates for Aer Lingus, and tax relief for affected staff.

In the following year 913 staff were made redundant, with 715 of those successful in applying for other roles within the group, with changed duties and lower salaries.

However, the Irish Revenue and Business departments questioned the deal. Following a review by the airline, it was decided that the exceptional provision be made rather than potentially entering into a dispute with the taxman that could lead to an even higher bill.

Aer Lingus said it was "inappropriate" for it to seek to recover funds from its staff to cover the bill. The review of the matter is continuing.

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