The Rolls-Royce of tax avoidance schemes

I have just exposed the fact that Rolls-Royce pays no UK corporation tax on its profits in other countries.

One of the reasons given for this immoral outrage is that Rolls-Royce conduct their research and development in the UK and this lowers their corporation tax lability with R&D tax relief. (Another is that their profits arise elsewhere but that’s sophistry).

Well, that is an admission of tax avoidance because it is the single biggest tax avoidance scheme included in my tax gap calculation and because it is in my tax gap calculation it must be avoidance.

R&D tax avoidance schemes cost the UK over £1 bn a year. The scheme was snuck into a finance bill over ten years ago by a secondee from a top accountancy firm.

It is time we ended this neoliberal nonsense and restricted scientific tax incentives to important political and economic research such as my own.

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6 thoughts on “The Rolls-Royce of tax avoidance schemes

  1. Just had a quick look at the numbers. Of the £620m, roughly 1/3 disappears due the the substantial shareholdings exemption, which is an explicit relief. Half the rest is overseas, and half is deferred tax.

    The UK sales are £1.6bn out of £12bn, so if you simply pro-rated the pre-tax profits of £1.5bn you’d expect £200m of UK profits, and so a tax charge of £49m (using 24.5% for the year).

    Of that £26m is R&D, leaving only £23m of current tax to account for. Now nearly all the deferred tax seems to be foreign exchange differences: you’d expect a lot of that to arise at the head office, and you’d expect it to reduce the current tax charge. It’s nothing fancy, just reconciling accounting profits to tax profits.

    So in fact what we might have is nearly all the deferred tax arising in the UK, which would give a UK tax charge of £200m and thus an effective UK tax rate of nearly 100% (subject to some very sweeping assumptions).

    • Your comment is ill-informed and ignorant and based on your political prejudices which presumably involve oppressing and exploiting the poor!

      So stop your blatant ad hominem attacks and go do your trolling somewhere else.

      Your presentation of all of the wrong facts is just tedious.

      • I’m sorry, I don’t see what is wrong with that comment. Could you back up your assertions in some way?

        Otherwise this seems a little hypocritical.

      • Spot on Murphy! All the tax avoiding scum are coming out now aren’t they? Their all wining about how its unfair when they get caught.

        Yeah, Polite Commenter, you obvioulsy want to maintain the status quo and see the NHS dismantled you Tory posh boy. Give us our money!

  2. Pingback: My Budget 2013 predictions | The Justice for Taxes Network

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