The retailer dispatches online orders destined for mainland Europe from the UK but bills the transaction to Ireland, according to documents seen by the Guardian.
In a structure used only for overseas sales, the company’s UK warehouses sell goods to Marks & Spencer (Ireland) Ltd at wholesale prices, allowing M&S to pay Ireland’s 12.5pc rate of corporation tax, the lowest in Western Europe, on any retail mark-up.
Such arrangements, known as “transfer pricing” are completely legal but have drawn heavy criticism in recent months. Tax avoidance is set to feature high on the agenda at next month’s G8 economic summit.
M&S is a UK domiciled company. So doing this doesn\’t save it any tax at all.
It might delay or defer a tax bill, but it doesn\’t reduce it.
For any profits that are brought in to the UK so that they can be paid out as dividends (which is the purpose of the whole game, after all) will be subject to the UK corporate tax rate minus the corporation tax that has already been paid. If they don\’t bring it in but reinvest it in the business, well, there are enough tax breaks and investment allowances that they wouldn\’t be paying corporation tax on it anyway.
The important point to note is that using Ireland (or Luxembourg, Bermuda, whatever) does work to dodge UK corporation tax for companies not domiciled in the UK. It does not work for companies which are domiciled in the UK.
UPDATE: And wouldn\’t it be interesting if Timmy understood the tax laws?