SECRET TAX DEALS were struck between large UK-based companies and Luxembourg in order to minimise tax liabilities, according to the BBC’s Panorama programme.
Documents obtained by the programme show plans were made to shift profits offshore in order to reduce corporation tax, set at 28% at the time.
Pharmaceutical giant GlaxoSmithKline (GSK) and media company Northern & Shell are believed to be among the companies involved.
Both businesses told the BBC they had a duty to plan their tax affairs in such a way as to comply with the legislation while minimising the tax burden for themselves and their customers.
GSK set up a subsidiary in Luxembourg 2009, which lent UK-based GSK in £6.34bn in 2010. Interest of £124m was paid to the Luxembourg firm, removing that money from the UK tax jurisdiction.
In Luxembourg, the tax authorities had agreed to levy tax at just under 0.5%, collecting them just £300,000.
Northern & Shell, which owns Channel 5 and OK! Magazine had its UK subsidiaries lend money totalling approximately £804m between each other before setting up another subsidiary in Luxembourg and shifting the loans there.
Interest payments on those loans left the UK, leaving lower profits available for taxation by HMRC.
In Luxembourg, that money was taxed at less than 1%, which saw Northern & Shell save some £6m which otherwise would have been paid in corporation tax in the UK.
Tax expert Richard Murphy told the BBC the practice was “all absolutely, without a shadow of a doubt, legal. I am still able to ask the question, is this acceptable? This is purely artificial structuring which is designed to undermine the tax revenues of the UK.”
In a statement, GSK said it “strongly refutes any allegation of wrongdoing. Both the UK and Luxembourg tax authorities are agreed that we have piad all taxes that are due.
“In total, over this period we paid around £1bn in UK taxes, plus an additional £1.3bn through income taxes of our UK employees,” it added.
Making Tax Digital will impose significant additional tax compliance costs on small businesses for little or no medium term benefit, tax and small business experts told MPs
MHA MacIntyre Hudson has partnered with cloud accounting software provider Xero ahead of the government’s requirement for digital records
The drive towards a fully digital tax regime is an admirable one, but mandation is simply wrong, according to one of the UK's most senior tax technology practitioners - Paul Aplin
Does Darwin's theory apply to taxation? Colin ponders...