Taxman criticised for letting Sackler companies ‘dodge millions in corporation tax’

Tycoon: Mortimer Sackler
Rex Features

HM Revenue & Customs is facing criticism for allowing companies owned by the Sackler family in the UK to avoid potentially hundreds of millions of pounds in corporation tax over the past two decades.

This arrangement may have deprived UK public services of more than £30 million in 2015 alone. At the same time, the London-based Sacklers were parading as major philanthropists for the £17 million their trusts donated that year to public bodies in the UK, often in return for naming rights. In a joint statement, the Sackler-owned Napp Pharmaceuticals and Mundipharma did not challenge any of the Standard’s allegations but said: “We are transparent in our dealings with HMRC. We follow HMRC’s guidance in full.”

But a tax expert said such an arrangement had to genuinely add value to be legal, and that there appeared to be no commercial rationale for the Sackler offshore firms other than avoiding tax.

The Standard contacted HMRC to ask if it had allowed an industrial-scale tax dodge. It released a statement stating: “HMRC has a very strong track record on challenging contrived tax arrangements. In 2016/2017, we secured an extra £8 billion for our vital public services by cracking down on large businesses.” But HMRC declined to respond to the specific charge raised about the Sackler companies. “We do not comment on identifiable taxpayers or businesses”.

HMRC would not be drawn on why it had allowed billionaire Mortimer Sackler to avoid paying personal UK income tax, capital gains tax and inheritance tax on his worldwide estate by claiming non-domiciled tax status in the UK up until his death in 2010 at 93. He had renounced his US citizenship and had come to live in London in 1974. He was resident in the UK the last 36 years of his life, taking an English wife and raising their three British-born children in London.

But HMRC did acknowledge that his arrangement would not be allowed today. It said: “From April 2017, new rules mean that an individual resident in the UK for 15 out of the past 20 years will be deemed domiciled in the UK for tax and inheritance tax purposes.

“These changes end the ability to permanently claim non-dom status and mean that those deemed as UK domiciled will be taxed on worldwide income and gains in the same way as UK domiciles.”

The change comes too late to recoup the hundreds of millions of pounds of tax Mortimer avoided paying in the UK. But there was a silver lining. HMRC said a Diverted Profits Tax (DPT) had come into force to prevent “contrived tax arrangements”. It said: “The Diverted Profits Tax, introduced in 2015, is designed to encourage large companies that try to minimise their tax liabilities through the use of contrived arrangements to change their behaviour, or face paying tax at a higher rate.” It said changes had yielded £6.2 billion over five years.

Robert Palmer, executive director of Tax Justice UK, said: “The Government can change the tax system so everyone pays their fair share.”

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