Tax avoidance debate turns to private equity

Alice Murray
18 June 2013

Tweet
Facebook
LinkedIn
Google plus
Send to

Tax avoidance is top of the agenda for the G8 summit in Northern Ireland and part of that discussion will concern UK private equity’s treatment of corporation tax.

A study produced by the Financial Times has highlighted the amounts of corporation tax paid in the UK by private equity-backed companies. The analysis compares nine private equity-backed consumer brands to listed counterparts.

The research found that Alliance Boots had built up an accounting tax benefit of £132m since being acquired by KKR in 2007, despite recording operating profits of £5.2bn.

According to the FT, the unearthing of the Boots Alliance tax credit has urged unions and MPs to call for a revision of the rules around tax deductions on interest payments, the mechanism used by private equity to minimise tax payments on highly leveraged assets.

The study found that Permira and Apax-backed New Look, Permira-owned Iglo and Blackstone's Merlin Entertainment have all paid taxes below 11% of total operating profits since 2007.

As emotions continue to run high around corporation tax avoidance in the UK, following the revelation of large multinational firms paying minimal tax on vast revenues accrued in the country – such as Google only paying $16m despite generating $18bn of revenue – the topic has become a key discussion point for the G8 summit and companies believe it is up to governments to set the rules for taxation.