Transport hubs in Eurobond tax avoidance controversy

SEVEN UK TRANSPORT HUBS have been accused of using a tax avoidance strategy, allowing them to shield millions of pounds from HM Revenue and Customs.

The companies borrowed at high interest rates from subsidiaries of their owners based abroad. The owners then received the payments tax-free, issuing the loans through the Channel Islands stock exchange, listing them as ‘quoted Eurobonds’.

When UK companies pay interest to non-UK businesses, they normally have to withhold 20% of the payments and pass them to HM Revenue & Customs.

However, where loans are issued as quoted Eurobonds on a recognised stock exchange, such as that in the Channel Islands, they are exempt.

The companies implicated after an investigation by action group Corporate Watch and The Independent are Midland Expressway, which runs the M6 Toll road, Gatwick Airport, Bristol Airport, Associated British Ports, which runs 21 ports across the UK, Peel Ports, which runs the Manchester Ship Canal and the Port of Liverpool, Forth Ports owners Arcus and High Speed 1.

In February, six UK water companies were reported to have avoided a collective £3.4bn using the Eurobonds method.

Of the current group of companies accused, Peel Ports is estimated to have shielded £14m from the taxman using the scheme, while Associated British Ports allegedly saved £55.7m in 2012.

All the companies insist they comply with UK tax laws.

Gatwick said in a statement that investments made in the airport’s infrastructure meant it made losses before each tax year over the past four years.

“The use of equity rather than shareholder debt to help fund the investment would not have moved Gatwick into a corporation tax paying position during this time,” its spokeswoman said. “Gatwick Airport ensures its commercial arrangements remain in line with HMRC’s expectation, and we are fully compliant with UK tax law. In particular, HMRC are wholly aware of our funding structure.”

Bristol Airport added: “Bristol Airport fully complies with UK regulatory, tax and legal requirements.

“The use of quoted Eurobonds is a well established and legal means of raising capital used by many companies in Britain and other countries.”

The Peel Group said: “The Peel Group continues to reiterate its position which is that it pays its fair share of corporation tax. All Peel Group businesses, which include Peel Ports Group Limited, are UK domiciled for taxation purposes and pay the appropriate level of UK corporation tax.”

Midland Express Way said it “complies with all UK tax, regulatory and legal requirements”.

Arcus said: “Arcus structures its affairs to comply with all relevant tax laws.”