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The Great Tax Avoidance Debate: Where do you

stand?

By Chloé Faulkner, 18th October 2012

With tax avoidance appearing to have swiftly become the nation’s most contentious issue of late, it is hardly surprising that on an almost daily basis more and more multi-national firms or much loved celebrities are being accused of acting immorally and are dragged into the mud-slinging world of tax avoidance.

So here we have a synopsis of the biggest tax avoidance stories this week but you have been warned; this will not be the last of it:-

Facebook

An analysis of the social networking giant’s UK business has revealed that Facebook paid just £238,000 in corporation tax in the UK in 2010/11.

Although accounts lodged with Companies House showed a turnover of £20.4million for Facebook UK Limited, an independent research firm has estimated their UK sales at £175million as advertisers have been continually attracted to the world’s biggest social networking website.

The decision to base its non-US headquarters in Dublin has allowed the majority of Facebook’s UK revenue to be diverted to Ireland, which has a much lower corporation tax rate, allowing the company to avoid millions in tax.

Starbucks: Tax Avoidance?

Starbucks

Starbucks, the second largest restaurant/café in the world which prides itself on its ethical standards, failed to pay any tax in the UK for the past three years.

The coffee chain, which has opened 735 outlets since arriving in the UK in 1998, posted a loss of £33million last year despite making sales of £398million.

Thousands have threatened to boycott the coffee chain after the revelations came to light.

So how do Starbucks calculate such a big loss against astronomical sales?

Firstly, large royalties and licence fees are paid to another arm of the firm in order to use the brand name and serve Starbucks products. In 2011 this amounted to £26million as a hefty 6% is charged on each cup of coffee.

Secondly, all coffee beans for all of the firm’s European divisions are purchased through a Swiss firm and distributed to the UK as a way of pushing profits around the UK.

Finally they have been accused of funding the UK division entirely by loans from another part of the company, although it is not known from where exactly, and having extortionate interest rates charged.

Anne Robinson

The Weakest Link’s Queen of Mean, along with Take That members Gary Barlow, Mark Owen and Howard Donald, is alleged to have been a member of a tax avoidance scheme which sheltered £1.2 billion from HMRC over four years.

According to reports, approximately 2,000 investors were involved in the scheme which created artificial losses, by buying and selling dividends, which members could in turn offset5 against their tax bills.

Robinson, it is believed, paid £280,000 to Mercury Tax Strategies in order to save tax on £4 million.

The Take That members involved collectively attempted to save an additional £6.5 million.

Although the scheme which ran between 2004 and 2008 closed down when new legislation was introduced, HMRC are hoping to claw back some of the lost revenue and a First Tier Tax Tribunal hearing is expected to take place in the Spring of 2013.

Public opinion appears at the moment to be divided on the issue of tax avoidance.

Although some feel very strongly about the “immoral” actions of the wealthy, others sympathise with the legal attempts to save money and agree it is something they would do given the chance.

So where do you stand on the waging war on tax avoidance?

Let us know. Contact chloe.faulkner@kinsellatax.co.uk to tell us your thoughts.

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