News Column

Osborne's tax changes sweeten Alliance Boots liabilities pill by pounds 100m

May 16, 2014

Zoe Wood



The owner of Boots the Chemist, Alliance Boots, has reported a global tax charge of just pounds 2m after George Osborne's tax changes wiped more than pounds 100m off its liabilities.

The group, which is part-owned by the private equity firm Kohlberg Kravis Roberts (KKR) and the Italian billionaire Stefano Pessina, saw a 16% increase in annual pre-tax profits to pounds 973m.

It paid pounds 90m in tax in the UK for the year to March, 40% more than the previous year, and a further pounds 51m elsewhere. But these payments to the taxman were almost entirely offset in the group's 2014 accounts by a pounds 113m credit, largely due to a reduced calculation of Boots' colossal deferred tax bill.

Like many large corporations in the UK, Boots has been able to boost profits by tearing up calculations on tax it is due to pay in coming years after Osborne introduced cuts to the corporation tax rate.

"This is a huge gift from the chancellor to big business," said the accountant and tax campaigner Richard Murphy. "Osborne has just written off future tax liabilities, and the rest of us will have to foot the bill."

Boots has previously been criticised by tax campaigners for loading the company with debt in a way that depressed taxable profits. Some have also argued that the group's UK tax bill is further distorted as heavy tax-deductible interest payments are borne in Britain despite more than two-thirds of sales coming from overseas.

"The public expects a company like Alliance Boots, which makes profits from the taxpayer-funded health service, to be paying their fair share," said Owen Espley, senior economic justice campaigner at War on Want. "The government has the powers to stop this kind of abuse, and yet is failing to act."

KKR and Pessina prised Alliance Boots off the stock exchange in 2007 in a controversial pounds 12.2bn takeover backed with pounds 9bn of debt. The following year they moved Alliance Boots' headquarters to Zug, Switzerland. In 2012 they sold a 45% stake to Walgreen for pounds 4.3bn and from February the US drugstore has a six-month window to buy the remainder for a mixture of cash and shares.

For the year to March, net debt was reduced by pounds 842m to pounds 5.1bn but its finance costs, which are tax deductible, increased from pounds 373m to pounds 387m.

Tax experts from the OECD have promised action in relation to companies that borrow aggressively and, in doing so, depress their tax bills.

16%

The increase in Alliance Boots' annual pre-tax profit, reported at pounds 973m. The group's global tax charge was just pounds 2m


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Source: Guardian (UK)