Tesco claims it was accused of evasion

Newspaper journalists from The
Guardian initially accused Tesco of tax evasion, the supermarket group
has claimed in court documents detailing its libel complaint against the
newspaper.

The revelation is contained in the supermarket’s libel writ against the
paper, among other allegations made in a document that runs to more than 30
pages.

Tesco claims it did not avoid hundreds of millions of pounds in corporation
tax on a
sale-and-leaseback deal, as the paper claimed, and that it told the The
Guardian so repeatedly before and after publication.

Denials were ‘glossed’ over and the enrolment of the lawyer working on the
deal, a corporation tax expert, to separately deny the tax savings in a letter
to the editor did not result in publication of the letter, the supermarket says.

The case, thought to be one of the first to allege that a company has been
libelled by claims of tax avoidance, is likely to thrust the issue of tax
avoidance and corporate social responsibility into the foreground of public
discussion.

Tesco is claiming ‘special damages’ over the allegations for libel and
malicious falsehood. The Guardian says Tesco’s moves are an attempt to
silence opposition and will ‘chill’ public debate on a matter of great public
interest.

The case is expected to see the intimate details of a complicated tax deal
discussed in open court, as the paper and the supermarket trade blows.

Initial questions included allegations of tax evasion, the supermarket says.
‘[The journalists accused] the claimant of setting up structures involving
Cayman Islands companies for the sale and leaseback of its property which would
amount to not just tax avoidance but ‘“tax evasion”.’

The Guardian’s articles, published in February, eventually
maintained the arrangements could allow Tesco to ‘avoid’ up to £1bn in
corporation tax. But the supermarket claims in court documents that the Cayman
companies are in fact UK tax resident. The gain ‘are within the charge to UK
corporation tax,’ it says.

Tesco has not outlined in full the reasons for the Cayman companies, saying
only that it was for the purpose of the joint venture and that there may be
stamp duty ‘savings’ associated with it.

Despite the scornful claims in the writ, the supermarket does not disclose
either exactly how much tax it paid on the deals.

Tesco says that it repeatedly denied claims that there was any corporation
tax avoidance involved with the structures, a denial that did not feature in
The Guardian’s stories.

‘Tesco’s denial of corporation tax avoidance was an inconvenient truth, which
the defendants had simply, and quite deliberately, chosen to ignore and
suppress,’ it says.

The lawyer working on the transaction wrote to the paper after the
publication of its first stories to say that the allegations of corporation tax
avoidance were untrue.

John Overs, the head of corporate tax at Berwin Leighton Paisner, which had
acted for Tesco in helping to structure the Cayman Islands transactions, wrote
to the paper saying that the ‘fundamental premise of the article’ was
‘completely untrue’. The letter was not published, the writ says.

Tesco has accepted that there are stamp duty ‘savings’ associated with the
structure, a point that the paper will also be likely to play on in its defence.

The writ details letters from Tesco customers who claimed to have found the
arrangements claimed by The Guardian reprehensible. One said: ‘I
consider it your duty to pay UK taxes on the profits you make in the UK,
especially as you are an extremely profitable company.’

The Guardian has 28 days to outline its full defence, and has said
only that the legal moves looked like an attempt ‘to shut down perfectly
legitimate inquiries into their methods of tax avoidance’.

‘At no point during the pre-publication correspondence would Tesco even admit
to the offshore structures, less give the explanation they advanced
post-publication.

‘We offered meetings to discuss the allegations: the offer was rejected. We
included Tesco’s explanation in the articles, and have subsequently offered the
company the opportunity of a full and prominent right of reply,’ the Guardian
Media Group said in a statement.