Earlier this year much play was made by HM Treasury that they would bar tax avoiding companies from public contracts. And now the FT reports:
A company that has paid no corporation tax for eight years has won a £150m government tender to improve mobile connectivity, despite calls for it to be excluded from public sector contracts.
Arqiva, the communications group, said no additional pressure had been placed on its tax status, which is legal, during the year-long bidding process for the Mobile Infrastructure Project (MIP), run by the Department for Culture, Media and Sport.
So now we see the reality of the Treasury's bluster on tax: it's business as usual.
Doers the word 'hypocrites' come to anyone's mind by any chance?
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I’d use two – corrupt cowards.
the article (and the accounts say) they have a large amount of tax losses available via interest payments and capital allowances. HMRC can challenge the interest payments if not arms length (or the company could just go and borrow from a UK bank on the same terms) and capital allowances are a bog standard relief for capital expenditure available for all.
You can disagree with reliefs for interest payments and capital allowances, but I wouldnt exactly call this situation at the “cutting edge” of tax planning !
They all say that
And yes, I do think interest payments at the heart of tax issues right now
i dont disagree – but at the moment interest payments and capital allowances claims are tax deductible, so Im not sure what HMT are supposed to do in terms of stopping this company from tendering for a public contract?
As ever I am saying change the rules
So what should the rules be? That if you borrow a large amount of cash to invest in infrastructure, you should get no tax relief for the investment but should be taxed on EBITDA?
That seems like a bit of a disincentive.
The problem is when the borrowing is not to third parties
And when it’s not limits are needed to prevent excessive gearing
So either way tax relief on interest has problems attached
Your blog is the first thing I read when I go online. So I start the day angry. Is this a good thing?
Well that’s how I start it….
Carol – have you heard of the echo chamber effect as a media concept?
George Osbourne said:
“…this meeting confirmed that there are more areas of agreement between us on fiscal policy than is commonly assumed…”
“Quite what that means in real terms is anyone’s guess, but what it does not mean is that the British Government is going to be cracking down on the offshore sector any time soon”
http://rowans-blog.blogspot.co.uk/
Arqiva borrowed a heck of a lot of money to rebuild the nation’s TV transmitters over the last five years. They own a very large proportion of the TV and radio masts in the country (all official TV masts, all BBC FM radio masts, a large number of ‘independent’ radio masts). That puts them in a unique position regarding deployment of connectivity. If the government did not contract with Arqiva they would simply end up going to a middle-man, who would in turn contract with Arqiva. Most of Arqiva’s masts already host one or more mobile phone network base stations.
Arqiva was formed from a merger of NTL and National Grid Wireless’s UK broadcast operations. NTL’s facilities were originally owned by the IBA and privatised by Thatcher in 1990. NGW’s masts were originally owned by the BBC and privatised by John Birt in 1997. As a condition of the merger, making Arqiva a monopoly provider, they have to openly publish financial statements for the “Office of the Adjudicator – Broadcast Transmission Services”.
Arqiva also got NTL’s satellite uplink (‘Teleport’) sites. Most channels are uplinked to the Astra satellites (Sky, Freesat) by Arqiva or by BT, with the BBC running their own teleports and using BT or Arqiva as a backup.
Although it’s funded by inter-group loans, all of the companies listed in their most recent report http://www.arqiva.com/corporate/pdf/arqivaltd/Arqiva%20Ltd%20Annula%20Report%20and%20Financial%20Statements%20YE%20June%202012%20Final.pdf appear to be UK-registered companies (there are companies with those names registered with Companies House). Last year’s profit was £232m, but they claim £721m of loans falling due within one year.
Arqiva do have a presence in the Isle of Man and Jersey, but this is because UK broadcasting legislation has been extended to those islands through Orders in Council – neatly illustrating that the UK *does* have power to legislate for the Crown Dependencies.
Arqiva is predominantly owned by the Canada Pension Plan Investment Board (Canadian public-sector pension fund) and the Australian Macquarie Bank.
All this mucking about does mean that we’re probably paying more for our TV and radio to be broadcast than we would have, had the infrastructure remained in public hands. Still, I think this is legitimately deferred tax.
(I don’t have any financial interest in Arqiva, I’m just interested in broadcasting – and keeping a strong opponent to Sky.)
I note the owners
One has considerable form when it comes to tax avoidance
You seem to make a lot of unsubstantiated claims:
1. Arqiva you claim is involved in tax avoidance and you fail to supply any evidence.
2. You then claim that one of the shareholders has considerable when it comes to tax avoidance – again no evidence.
You then take the view that the company is complying with the system as is intended by the legislature but it seems you dislike the system. If that is the case, how can Arquiva be avoiding tax? This is simply a nonsense
The nonsense is that the Treasury said it would not give contracts to non-tax payers, and has
That’s what I was saying
The Treasury said that evidence of tax avoidance (defined as having a TAAR applied to you) would be taken into account as one factor in the procurement process. That’s a different thing altogether.
Ah, so now you’ve realised that what they said and what they meant aren’t the same thing
Thanks for agreeing
No, “what they said” and “what you claim they said” are not the same thing.
Although I note that a couple of months ago you described the position as:
“the Treasury has proposed that a companies track record with regard to tax should be considered when assessing suitability for the ward of a public sector contracts”
You seem to have changed your interpretation of the Treasury’s position considerably since then.
Not at all
I was just pointing out a fact
You consider that
“…a companies track record with regard to tax should be considered when assessing suitability for the ward of a public sector contracts” (you, two months ago)
and
“…bar tax avoiding companies from public contracts” (you just now)
are the same thing?
I really can’t see that at all. The latter is a caricature of the former.
In your opinion