Cadbury’s tax bill

The American owner of Cadbury paid no corporation tax on its main UK business last year, despite making a profit of £177 million.

Mondelez UK legally avoided the tax bill thanks to a £42 million non-cash accounting gain from the sales of its coffee business, which was exempt from tax, and because it could offset other tax liabilities against interest payments.

The Sage of Ely tells us that avoidance is only avoidance if a provision of the law is used in a manner which no reasonable law maker would note or intend.

G. Brown specifically changed the law so that selling off a subsidiary did not attract tax upon the profits of having done so (SSE). On the grounds that he wanted to stop people claiming a credit on selling at a loss. Using the law as it was specifically changed to make you do so is not avoidance.

Interest on borrowing is a cost of doing business. Deducting it is not avoidance, it’s the law.

It ain’t avoidance, is it?

26 thoughts on “Cadbury’s tax bill”

  1. To be pendantic, is one legally forced to claim interest payments against taxable income? Could one voluntarily not put an interest payment down as an expense if one so chose? And if one were subsequently inspected by HMRC would they just accept your choice or would they add that expense back in regardless of your wishes when calculating the tax due?

  2. I notice RM was quoted – as an authority on tax – by the comedian Mark Thomas yesterday in his “Mark Thomas: The Manifesto” program on radio 4.

  3. Let us all club together to sponsor a colossal statue of G. Brown and place it at some strategic spot in the City whence Our Former Leader can cast his bronze gaze across his works. I suggest the inscription, in suitably classical capitals, should read SALVATOR MUNDI, but am open to others such as SALVATOR NATIS GOLDMAN SAXICIS.

  4. Could one voluntarily not put an interest payment down as an expense if one so chose?

    One might. But one’s auditors would note that you did so and qualify the accounts. And one’s shareholders might gang up and sack you for doing something quite so silly.

    There is a place for sending presents of cash to the government and it isn’t in corporation tax returns.

  5. Certain members of the public and MPs are obsessed with giving away other people’s money despite it not being a requirement to pay it.
    Nicking it first of course but they never accept that is the case.

  6. Richard Murphy is not, never has been and never will be a tax expert or any sort of authority on tax. He holds no professional qualification in tax.

    Or maybe he did but he disintegrated himself from it

  7. Him

    The accounting answer is as Surreptitious Evil described it. The tax answer is the difference between a claim and a deduction. I believe (and I am happy to be corrected) that interest is a trading deduction.

  8. Interest is a deduction, but whether it’s trading or not depends on why you took out the loan.

    In this case I suspect that the loan was taken out by a holding company to acquire the trading companies, so is a non-trading loan. The interest would therefore be a non-trading deficit, and to set that against the profits of the same company, or another company in the group, requires a claim.

    Also, the holding company could have been funded by an equity injection rather than by debt. Although the debt is clearly not excessive compared to the holding company’s equity, as an adjustment for thin capitalization is the easiest adjustment for HMRC to impose from a transfer pricing perspective, and the first thing they look at.

  9. “I notice RM was quoted – as an authority on tax – by the comedian Mark Thomas yesterday in his “Mark Thomas: The Manifesto” program on radio 4.”

    How is that tedious cunt still in broadcasting? He makes Mark Steel look like Eric Morecombe.

  10. Rob

    He is televisual Mogadon certainly – dreadful….

    As to the wider issue, an interesting idea from RM in the comments:

    ‘Who knows?

    These things are always throwing ideas out and hoping something sticks’

    A good summary of his approach to blogging and policy proposals in general. I am put in mind of this quote from ‘Origins of the Second World War.

    ‘Maybe the world would have been saved a lot of trouble if Murphy could have been given a job in some Irish equivalent of Chatham House, where he could have speculated endlessly for the rest of his life’

  11. To be frank, £177m profit on an £11.5 billion investment is not a great return for an established manufacturing company, and with a gross balance sheet probably several times £11.5 billion, it would be surprising if the entire tax base wasn’t wiped out by the capital allowances and other timing differences for the period, notwithstanding the £42 million of tax free disposals. No avoidance here, just business as usual.

  12. “Bloke in Wiltshire

    That’s really surprising. Radio 4 giving a comedy show to a Trotskyite.”

    Before I gave up on it, typical Radio 4 (and BBC 2) fare seemed to consist of luvvies taking it in turns to say “That David Cameron? He’s a Toff!!” before laughing at their own “clever joke”.

    Not sure what they say now. Although I suppose they do have Boris. Who is a Toff!!

  13. Andrew C,

    I don’t know. Except Radio 3 I gave up on the BBC. Radio 4 is like Guardian Wireless. Radio 2 is so stuffed full of people plugging their book/film etc, that I get less ads on commercial radio, and Radio 1 is just awful.

    I mostly listen to a local commercial station.

  14. Here in sunny Austin, we have a public-supported classical radio station – KMFA.

    Public-supported means that individuals (like moi) send it money, not that it’s state-supported like the Beeb.

    KMFA is 24 hours a day, seven days a week classical music. You can listen to it near Austin on an old steam radio, or elsewhere in the world by internet streaming (at reduced quality, alas).

    Simple instructions at http://www.kmfa.org/pages/385

  15. “Everyone’s a fruit and nutcase”

    Anyone remember that Cadbury slogan from the 80s? Mayn’t even the 70s?

    Not that it has much relevance in a thread about Cadbury and Murphy. Just a bit bored.

  16. To be fair to our Friend, there is likely an element of thin capitalisation involved although given his accounting knoweldge he probably thinks that is a 1980s Girl Band

  17. This is the same thing the Guardian used over Autotrader isn’t it ?

    Perhaps someone should tell him and see if he has a go at them.

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