US Firms Handed £79m Bill

US firms handed £79m bill after losing British tax avoidance case

The taxman has won a £79 million tax avoidance case against Goldman Sachs and Cargill after a court found that the US giants dodged taxes in the UK

The case, one of the biggest corporate tax wins for HMRC in recent years, relates to a tax avoidance scheme set up in 2006-07 when they owned the now- defunct Teesside power station.

Cargill’s private equity division and Goldman Sachs took over Teesside Power Limited, which owned the gas- fired power plant near Redcar, after the collapse of the former owner Enron in 2001.

Teesside Power successfully claimed through US bankruptcy proceedings for hundreds of millions of pounds that were owed to the plant by other Enron subsidiaries, which had bought the electricity it generated. On the advice of its auditors, EY, Teesside Power then set up a Jersey-based company to try to avoid paying corporation tax on about £200 million of the money it claimed by converting it into shares.

A spokesman for the tax office said: “HMRC disputed this and won, confirming it was a tax dodge and UK taxes were owed. It’s a significant win, worth a lot of money.” HMRC said it had now issued a £79 million bill for tax that was avoided, after the Court of Appeal ruling this month.

The bill was officially issued against a subsidiary of Engie, the French energy giant formerly known as GDF Suez, which bought the plant in 2008. In practice, however, Cargill and Goldman Sachs are liable under an indemnity agreement and were the companies fighting the legal case. In a joint statement, Cargill and Goldman said that the court decision was “disappointing” but that they respected it and that the disputed tax “was paid in full in 2015, as soon as it was requested by HMRC”.

Cargill, a vast agricultural conglomerate, is the biggest private company in the United States with revenues of $115 billion last year. New York-based Goldman Sachs had revenues of $32 billion last year.

The Teesside power station was Europe’s largest gas-fired power plant when it opened in 1993 and once provided 3% of the UK’s needs.

It was sold to GDF and Suez, the French energy companies that have since evolved into Engie, in 2008 and Teesside Power was rebranded as GDF Suez Teesside Limited. The plant was largely mothballed in 2011 and has since been demolished.

It is understood that Engie was obliged to keep the GDF Suez Teesside Limited company active in order that Cargill and Goldman could contest the tax bill with HMRC but did not play any part in the legal case.

Penny Ciniewicz, director of customer compliance at HMRC, said: “We have dedicated teams in place to tackle abuse wherever we find it.”

HMRC claims that it wins nine out of ten tax avoidance cases taken to court, with many settling what they owe before it reaches that stage.

Cargill and Goldman Sachs said: “The decision regarding the interpretation of tax law is disappointing but the parties fully respect the court process. In the meantime, all UK taxes, including those disputed, have been paid.”