In June 2008, after more than a century and a half in the UK, Boots moved out of the country to Switzerland. The British household name had been acquired, along with its company, Alliance Boots, in Europe’s largest private equity deal in 2007, thanks to £9.3bn of borrowing from banks and other investors. Interest payments on the Alliance Boots debt in 2008 were so large they wiped out profit in the UK – and the tax that used to go with it. HMRC rules allowed the company to set interest payments on its debt against profits for tax purposes, a benefit to investors that has helped to drive equity deals.
Ten years ago the Boots group generally paid about one-third of its profits in UK tax. The revenue could expect a tax charge around £120-£150m each year.
Then came the move to the low-tax Swiss canton of Zug. After huge interest payments, its worldwide profits last year were £475m. It is hard to see which parts of the company are now making what, but the cash flow statement for the year to March 2010 shows that just £14m was recorded as the tax charge on those profits – that is, just 3% of profits.
The company said in a statement: “Alliance Boots and the companies of its group comply fully with all applicable tax laws in each of the countries where they do business, including in the UK. It is a British business which continues to have its headquarters in Nottingham and is VAT registered.”
The Guardian, 11 December 2010
- Image: Andrew Aitchison