Those bastards at the Ritz for not paying tax

As we know there\’s a Panorama tonight about how awful they all are over at The Ritz for not paying any corporation tax.

Here\’s their accounts. Ritz

Dunno if that\’ll actually work but still.

I am not an accountant. But as far as I can see they\’ve indeed been making profits. But accumulated profits seem to be about the same as this year\’s profits. And they didn\’t pay a dividend last year either.

So I\’m assuming, that since accumulated profits are the same as this year\’s, that they had some whacking great losses in the past. Which they\’ve only just managed to catch up with.

I think that\’s right. And now we\’ve got The Guardian and Panaorama castigating them for not payin coprporation tax. Simply because they, righteously (and I\’m not at all sure that you\’re not allowed to either), has offset past losses against current taxes.

Really, if that\’s the best they can do……

As ever, if I\’ve got this explanation wrong do let me know.

24 thoughts on “Those bastards at the Ritz for not paying tax”

  1. From Note 6 Taxation on Profit on Ordinary activities, we can see that they have claimed Group Relief . What they have done is to offset the losses made by another group company against the profits made Ritz Hotel (London) Limited. This is quite common when you have a number of companies under common ownership where some make profits and others make losses.

  2. As per the first comment, it’s group relief wot’s done it. That’s pretty easy to see.

    However, it’s not especially helpful. I have two issues with it..

    1) It doesn’t tell me which company the relief has been claimed from. I’ve always been led to believe (by auditors) that this should be disclosed.

    2) These are UK consolidated accounts… so I think that means that the relief hasn’t come from a company in the UK group.

    I think we have to assume that the relief has come via the holding company, which is Jersey based. I don’t know much about group relief (other than that it does what it says on the tin) ao I can’t say if this is all entirely not unusual, or if it’s a bit odd.

  3. Thought Gang

    Au contraire – the group relief means that it is almost certain that the losses were made by a UK company…but EEA resident companies can also join the party:

    “As from 1 April 2006, if certain restrictive conditions are satisfied, it is possible for a 75% subsidiary resident in a European Economic Area territory to surrender its losses as group relief, (CTM81500 onwards).

    For companies to be members of the same group:

    one company must be a 75% subsidiary of the other, or
    both must be 75% subsidiaries of a third company.”

  4. @ Diogenes

    It could be a UK company that’s not in the same group.. but I don’t think it could be one that is.. because when one company in a group ‘relieves’ another, when you consolidate them together the transaction disappears. I’ve prepared accounts with lots of group relief… but never had it still sitting there in the consol.

    So if it’s another UK company then it’s in another UK group… meaning (I think) that the loss is going up to the Jersey holding company and coming back down again. I’m surprised that companies are allowed to do that *and* be so sparse with the disclosure… but, I freely admit, it’s not ‘my area’.

  5. The accounts say they consolidate in a small property investment company, so to all intents and purposes they’re standalone accounts – there could be (and I believe is) a large UK group apart from this company.

    The restrictions on EU losses are so significant as to be essentially a bar to relief, at least as far as they’re interpreted by HMRC. They acknowledge the theoretical possibility, but have raised the hurdles are almost impossibly high in practice.

    Auditors have never told me to disclose the surrendering company in the accounts. Mind you, they’ve generally insisted on the company paying for group relief to avoid any question of a deemed distribution, but if as in this case you don’t pay for it then I could see an argument that the related party transaction should be disclosed.

  6. It appears that the mad, sad and the envious these days are given more credence than the sane and rational. No wonder the world is in an economic mess and so many evil things occur such as the recent tragic shootings in the USA.

  7. Can we think of another group of companies where losses in one subsidiary company are offset against profits in another?

  8. Any UK group that has a profitable company, a loss-making one, and a basic knowledge of company taxation.

    The small owner-managed engineering group I just completed the returns for, for example.

  9. Tim is correct that the accumulated profits are less than the current year’s. So, unless the Barclay brothers are lying about not having taken any dividends 9which would be rather foolish as it’s checkable), the Ritz made net losses over the previous N years. Group relief has merely transferred those losses to a profitable group company and this year transferred some back – it has helped group cash flow but it is not significant.
    What *has* helped the Barclays is the combination of inflation, buying with borrowed money, and historic cost accounting so they now have an asset worth £586m but a book value of less than one-tenth and they have paid no tax on this gain.
    Inflation is a stealthy way of stealing from the saver to give assets to borrowers, tax free..

  10. I am certain that dearieme is correct.

    From long-ago service in the Revenue, I am also certain that the Accounts and company Tax Returns are closely checked by a very senior Inspector, and that will include as a first item of business, any claim for Group Relief.

  11. Arnald – group relief is basic. Even one Richard Murphy is aware of it. Hey! The burgers are burning….get back and flip them!

  12. Hardly need rich lawyers when its basic practice. Be like needing a lawyer in order to put fuel in your car.

  13. Murph’s ego obviously couldn’t de denied when he was approached to appear in this programme.

    What it seemed to consist of however was 5 minutes of Murph looking like a smug twat and telling us that he had spent time looking at the Ritz’s accounts and that, in his view, they should have paid tax, followed by 25 minutes of John Sweeny struggling to cycle around Sark whilst spouting innuendo about the Barclays, and allowing a few ‘locals’ to demonstrate to the wider world what an odd place it is. (and I like Sark !)

    Cheap tabloid nonsense which may well end in another libel award against the BBC courtesy of Sweeney’s behaviour. It would be nice to think that Murph also gets dragged in by m’learned friends for a chat at the same time.

  14. The Barclays send out a lot of libel nastygrams, but for obvious reasons (viz: many of the accusations levelled against them are actually true) take far fewer to court, and win fewer still.

    Neither “I think they should pay more tax” nor “Sark is a weird creepy Wicker Man island” are libellous, since both are either opinion or vulgar abuse (depending on quite how Wicker Man the second segment was).

    I personally think they’re weird sinister circus freaks.

  15. Oh don’t get me wrong. Much like most of Murphy’s ‘work’, we don’t need a lawsuit which is either valid, accurate or indeed has any real merit.

    I’d just like to see him shit himself (they can afford to be wrong longer than he can afford to be right), and spend 100’s of hours in un-necessary work defending his position for a change, and make a lot of people, even if they knew the case was was ultimately fatuous, happy into the bargain at the same time.

    That’s certainly one present your ‘circus freaks’ could give that would make many people’s Christmas.

  16. The gruesome twosome’s lawyers sent Private Eye a nastygram in Jun 2010 over a satire piece; Private Eye directed them to Arkell v Pressdram; they dropped the case without damages or an apology. That much is on record.

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