Rover bosses face new tax challenge

MG Rover’s owners the Phoenix Four could be hit by a £2.7m bill after
potentially falling foul of thin capitalisation tax rules.

The accounts of Techtronic (2000), an MG Rover subsidiary, reveal a
disagreement over the likelihood of being landed with the bill, with auditors
Deloitte saying a provision for the tax demand should be recognised in the

The tax dispute arises because of uncertainty over whether interest payments
between the companies in the MG Rover group are disallowable on transfer pricing

Since the group would have been unable to get such finance from a commercial
lender, HM Revenue & Customs could challenge the ‘interest’ arrangements,
taxing them and disallowing deductions, the accounts suggest.

The collapsed car companies separate accounts are a tax minefield.
Venture Holdings, the ultimate parent company, is itself facing issues relating
to group relief and also over the Dextra decision handed down last year.

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