Cadbury’s taxes

Hmm:

A British subsidiary of Cadbury’s American owner paid no tax last year, despite making a £2.1bn profit.

The accounts for Vantas International, ultimately owned by the Toblerone-to-Ritz maker Mondelez, show that £442m of income — about what it would have paid in corporation tax — was not subject to tax. Mondelez declined to elaborate on why there was no levy on the income.

Meanwhile, the company’s main operating subsidiary in this country, Mondelez UK, paid corporation tax equivalent to a rate of 0.6%.

It paid £122,000 on pre-tax profits of £22m. If the subsidiary had paid the standard rate of 20%, the bill would have been £4.4m. It lawfully avoided paying the tax thanks to “compensating interest deductions” of £11.9m during the year.

On that second, “lawfully avoided” is a hell of a phrase for the fact, a plain and simple one, that interest paid is a cost of doing business. We even have laws about people taking the piss which HMRC obviously don’t think they are.

On the first, the opening comment on the piece is fun:

Bad journalism again from the Times. I just had a look at the accounts at Companies House. This company doesn’t trade. It just holds shares in Cadbury group companies, along with some inter-company balances. During the year it moved some of them around and booked profit on some of the intra-group transactions. Quite normally, transactions like that aren’t taxable, because nothing really happened – they’re just rearranging the shareholding furniture within their own group.

It had no sales and no trading in the year. Nothing to see here.

27 comments on “Cadbury’s taxes

  1. Presumably the old “buy a company and then load it up with “debt” owed to the parent company so it conveniently makes no profit” trick?

  2. I assume a large part of this is just jealousy. That 70s feeling of hatred for the successful.

    However I would guess it is also because the tax system is now so complicated. I certainly do not understand my tax affairs. You need a professional. So most people can see that they pay for advice but end up paying a lot of tax. While some other people pay for better advice and end up paying no tax at all. It makes no difference if you say that this or that scheme is legal. No one understands the law except a few tax accountants anyway.

    Cadbury has shaken the magic eight ball and ended up paying a lot less than I do when I shake it. That does not seem fair. We need a simpler and more transparent system so everyone can understand that it is not a random matter of rolling the dice and getting lucky, nor is it one where money can buy you out of payment.

  3. We need a deal: every journalist who opines on such things publishes his own tax affairs. And every newspaper that carries his rubbish publishes its. Deal?

  4. If Cadbury isn’t making a profit it’s a failure, not a success.

    With this you could start insisting that interest is deductible only on real debt, not phony debt to offshore profits.

  5. “I assume a large part of this is just jealousy. That 70s feeling of hatred for the successful.”

    I think it’s mostly that journalists aren’t much cop and cannot handle complexity. Most of them come into journalism because they are writers, not subject experts. The kids who were good at English, not economics.

    It’s also the case that anyone who really wants serious information about anything to do with business and economics hasn’t gone to newspapers for a long time. You want to know commodity prices or analysis of the orange industry, there are specialists outside of the MSM who write papers on this stuff.

  6. So either BiGiT is an authority on the affairs of the Cadbury group or he is talking out of the Snippa hole. My bet is the letter

  7. However I would guess it is also because the tax system is now so complicated. I certainly do not understand my tax affairs. You need a professional.

    I don’t understand more than the basics of mine either, and nor does my (now ex) tax advisor. Still need to find a new one.

    And I don’t even have a particularly complicated or interesting tax life… Can’t imagine what it’s like for those who do…

  8. If a company makes no profit, it may be a failure. It may also be a roaring success. Why produce something to pay tax on it.

    Don’t all ‘non-profits’ do this?

  9. The days are numbered for interest as a tax deduct able expense.

    https://www.gov.uk/government/publications/corporation-tax-tax-deductibility-of-corporate-interest-expense/corporation-tax-tax-deductibility-of-corporate-interest-expense

    “The new rules will restrict the ability of large businesses to reduce their taxable profits through excessive UK interest expense. They are part of the government’s wider changes to encourage alignment of the location of taxable profits with the location of economic activity, and are consistent with the UK’s more territorial approach to corporate taxation.”

  10. BiGiT: With this you could start insisting that interest is deductible only on real debt, not phony debt to offshore profits.

    Your meaning has lost its way between your head and your keyboard.

  11. What is ‘excessive UK interest expense’?
    If I choose to borrow money to expand the business I’ll probably be paying 10 percent plus. Is that excessive bearing in mind its the offer on the table?

    Or instead just use profits to expand the business, as many small companies that pay little or no tax do?
    Either way with expansion there will be little or no tax.

  12. The interest restriction rules were effective from 1 April 2017 so you can’t just hear the crap out of a UK company and pay no tax anymore

    Sounds like a profit on disposal of shares from the other post which is exempt from tax in the uk

  13. In passing, are we going to have a thread on the dire problems England had defeating Argentina?

  14. Isit, so a Tory government is actually doing what snippa demands? As, as should not go unmentioned, the entire OECD is?

  15. As every journalist knows, it’s really easy to fool HMRC by charging interest.

    It’s not like HMRC have any weapons against this like the anti-arbitrage rules of Sch 3 Finance No.2 Act 2005 or unallowable purpose legislation at s441-442 Corporation Tax Act 2009 or the world-wide debt cap at Part 7 of the Taxation (International and Other provisions) Act 2010 or even the thin capitalization rules at s1000 et seq Corporation Tax Act 2009.

    No, as every journalist knows, HMRC are helpless in the face of ill-informed journalists……I mean clever accountants.

  16. @So Much For Subtlety, November 12, 2017 at 11:20 am

    However I would guess it is also because the tax system is now so complicated. I certainly do not understand my tax affairs. You need a professional. So most people can see that they pay for advice but end up paying a lot of tax. While some other people pay for better advice and end up paying no tax at all. It makes no difference if you say that this or that scheme is legal. No one understands the law except a few tax accountants anyway.

    I and others agree:
    Rachel Johnson: Spreadsheet Phil…I’m counting on you to…

    …the tax system in this country is, to use a technical term again, a joke (the tax bible Tolley’s weighs in at 21,602 pages and no single person can understand more than a tiny portion of it).
    As it happens, the Budget is coming up, so here’s my thought for Philip Hammond…

    …In the UK alone, the tax system is ten million words long. Nobody understands it. That’s why it’s not working. So for Pete’s sake, Spreadsheet Phil, make the tax code so short, sweet and simple that even I can understand it.
    Our economy will grow and the deficit will shrink.

  17. seen Murphy’s latest post
    some comedian making a joke about new yorker’s reaction to a terrorist attack (8 killed Incl 5 argentine friends) and Murphy posts it because it mocks Trump’s tax plans ?!?

  18. Accepting that the UK tax “system” is unintelligible, and that lefties like fiddling around to cast business as the devil incarnate, then surely tax simplification is a Tory essential. Scrapping corporation tax is thus the only sensible way to go. Along with stamp duty and CGT. And it would seriously wind up Murph et al. What not to like?

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