M&S accused of using Irish arm to avoid UK taxes

Marks & Spencer has come under fire for its tax practices following reports it uses an Irish subsidiary to bill European sales.

Marks & Spencer has come under fire for its tax practices following reports it uses an Irish subsidiary to bill European sales.

The British retailer is the latest in a string of UK companies to face the heat from tax campaigners over the way it structures its online sales to Europe.

Internal documents, obtained by The Guardian, show that the company's structure involves shipping goods from the UK but invoicing the transaction to Ireland.

The revelation has unfolded as the group expands its online operations across Europe with its new marksandspencer.eu site.

While orders made through the website from European customers are shipped from the UK warehouse, the transactions are all made with and charged to the company's subsidiary Marks & Spencer (Ireland).

Ireland has the lowest corporation tax rates in Europe at 12.5% compared to 23% in the UK.

The UK branch is paid a wholesale price for the goods it ships by M&S Ireland which is subject to a UK corporation tax. However, the rest of the retail markup is subject to Ireland's much lower corporation tax rate.

The process of using internal billing between countries in order to ship goods from one country when doing business in another is referred to as "transfer pricing". Although it is legal, the practice has been criticised by tax campaigners.

Ed Miliband pledged to tackle the mounting corporation tax avoidance after the public accounts committee chair, Margaret Hodge, said Google's tax structure was evil.

M&S dismissed claims it was trying to avoid higher UK corporation taxes, saying Ireland was a logical host for its European website.

"M&S is a major UK taxpayer, contributing over £800m to the UK exchequer in 2011/12," it said.

"We pay UK corporation tax on all profits generated by UK sales and comply with the tax laws of all jurisdictions in which we operate. We conduct our tax affairs in a transparent and legally compliant manner that is consistent with our longstanding values and complies with the tax laws of all jurisdictions in which we operate.

"Our European websites are owned by M&S Ireland. This is made clear to all customers shopping on our European websites. Ireland is our largest international online market, taking over 50% of our online European sales, which is why we structure our other European websites around it. It would not make good business sense for us to set up anew in every market we enter."

Suzy Blackwell of UK Uncut, a tax campaigner, accused the retailer of using "disgraceful" measures to avoid paying tax in the UK.

"The government must stop letting companies like Marks & Spencer dodge tax which could go towards funding vital public services," she said.

Shares fell 1.95% to 442.20p at 10:31 Monday.

RD

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