Claim Boots underpaid UK tax by £1.3bn

Anti-poverty advocates have asked the British government to investigate the offshore tax arrangements of Alliance Boots, alleging that the pharmacy chain operator has underpaid by as much as £1.3bn (€1.6bn).

Claim Boots underpaid UK tax by £1.3bn

UK charity War on Want and US labour union federation Change to Win called on chancellor of the exchequer George Osborne and UK Revenue and& Customs to probe the company’s use of so-called Limited Liability Partnerships, some members of which are based in the tax haven of the Cayman Islands.

“We strongly urge HM Revenue & Customs to bring an investigation into Alliance Boots’ use of these LLPs,” the organisations wrote in a letter that was sent yesterday. They contend the company avoided paying at least £1.12bn through interest deductions over six years, reducing its UK corporate tax bill 95%.

Alliance Boots, in which US giant Walgreen acquired a 45% stake last year, said in a statement that its tax affairs are organised “strictly in compliance with all applicable laws in each jurisdiction in which it operates.”

Since late 2012, the UK Parliament has held a series of hearings on global tax avoidance, including examinations of the strategies used by Google, Amazon and Starbucks.

The US Senate has held hearings on the tax-avoidance techniques of several companies that have used subsidiaries in locations such as Luxembourg, Bermuda and Ireland to pare billions of dollars off their tax bills.

The OECD is close to completing a plan requested by the G20 to combat so-called corporate profit-shifting, including the use of offshore units.

In their letter, the groups said after being bought in a leveraged buyout in 2007, Alliance Boots transferred store properties to a group of LLPs and used a Cayman Islands partner to “provide flexibility and a veil of secrecy to the whole business.”

According to a separate briefing note, Alliance Boots gets the advantages of being located in the UK, such as local law and rules on registered land holdings, while also receiving offshore tax advantages related to capital gains and interest income. Any profits on rental income would also be partly attributable to a Cayman entity, they said in the note.

Alliance Boots said the Cayman incorporated company is subject to UK tax, while UK properties that are held in an LLP structure are fully taxable in Britain, “so there is no tax benefit arising from this structure.”

The company said it paid 50% more cash taxes in the 12 months to March than in its last year as a public company through 2007, even though about two-thirds of revenue now comes from outside the UK.

— Bloomberg

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