CitySprint accused of tax avoidance
Earlier this month Corporate Watch reported that CitySprint, one of the UK's biggest delivery companies, was sending millions of pounds to its owners through tax havens, while refusing couriers' demands for “decent” pay.
An analysis of CitySprint accounts and other financial records showed that the company had racked up £8.2m in interest on loans from the investment fund that bought the company in 2010. As the loans had been taken out through the Channel Islands Stock Exchange, a legal loophole meant CitySprint's tax bills would be slashed while the interest on the loans were able to be sent to the owners, tax free.
Protests against the company
May and June 2015 saw a series of protests against the company by couriers in London who said they were exploited and underpaid. The couriers – who were all self-employed - had set up a branch of the Independent Workers of Great Britain (IWGB), a trade union.
They are now campaigning for the company to pay them the equivalent of the London Living Wage plus reasonable expenses “so that people can earn a decent living for the hazardous work they undertake”. They staged demonstrations at CitySprint's head office and those of clients including Google, the Guardian and Goldman Sachs.
Loans from tax haven based owners
Accounts filed at Companies House showed that when Dunedin took over CitySprint in 2010, the Edinburgh-based investment fund made the majority of its investment in the form of a £32.9m loan, made through the Channel Islands Stock Exchange. CitySprint had accrued £8.2m interest on the loan so far, at a rate of 8% - significantly higher than the rate of interest it was paying to other 'third party' lenders such as banks that it was borrowing from.
As well as ensuring CitySprint's owners enjoyed a healthy return, this scheme also saw the company's UK corporation tax bills slashed. The interest was deducted from CitySprint's profits before it was taxed (meaning the amount taxed was much lower). A legal loophole – called the 'quoted Eurobond exemption' – meant that the interest would go to the owners tax free when it was paid out. This was able to save CitySprint as much as £2m, with future savings increasing as more interest was racked up.
Corporate Watch put the above to CitySprint and Dunedin. Both said they were “fully compliant with UK tax legislation”.
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