Glaxo 'will go to European Court over tax'

Tax experts say that Glaxo Wellcome, the pharmaceutical group that goes to the Appeal Court this week against the Inland Revenue, is prepared to go all the way to the European Court if it loses its case in the UK.

The company's legal action against the Revenue questions the tax authority's right to go back before 1986 to contest the group's transfer pricing policy and hence its tax payments over a near 20-year period.

A judgment last month said the Revenue does have that right.

Tax experts say that if the company fails in the courts, it could find itself with a tax liability of hundreds of millions of pounds.

The company's annual accounts have consistently stated that adequate provision has been made for tax liabilities.

In a briefing document the company says the Inland Revenue has been in dispute with the company over a long period of time but, "despite the length of time that has elapsed, it has not yet assessed the group nor has it quantified its claims in any way".

"Furthermore," Glaxo says, "the Inland Revenue contends that it can continue its review without any time limit. Glaxo Wellcome contends that the law does not allow the Inland Revenue to leave taxpayers in such uncertainty, and has asked the courts to declare years up to 1986 closed to further review."

There are concerns in the City that Glaxo faces a far greater tax liability than previously thought as a result of its disputed transfer pricing policy.

Glaxo is reticent on two counts. It declines to say how much money is at stake and how far back the Revenue's claims to tax and interest go.

In US filings the company has indicated it has a potential liability of pounds 463m in the years from 1987 onwards, but this takes no account of possible tax owed by the company, and interest on that tax, prior to 1986.

Transfer pricing is the method by which subsidiaries of multinationals account for sales between different subsidiaries.

It can involve a company legitimately managing its pricing policy between subsidiaries to maximise the profits shown in low-tax regimes, such as Singapore, and minimise the profits shown in high-tax regimes.

The tax benefit in this case is likely to relate chiefly to Zantac, the anti-ulcer drug which was behind Glaxo's phenomenal growth in the 1980s. Sales of Zantac, which is manufactured in Singapore, started in 1981. It later became the world's largest-selling drug.

Meanwhile, the Inland Revenue appears determined to tighten up on corporate tax loopholes. In a new management plan to 1997-98 the Inland Revenue lists one of its key objectives as ensuring "that UK legislation on international tax matters is effectively complied with".

The Independent has recently shown how Rupert Murdoch's News International made nearly pounds 1bn in profits but paid just pounds 11.7m in tax, while complying with UK tax law.

Start your day with The Independent, sign up for daily news emails
Life and Style
Baroness Lane-Fox warned that large companies such as have become so powerful that governments and regulators are left behind
techTech giants have left governments and regulators behind
News
Keith Fraser says we should give Isis sympathises free flights to join Isis (AFP)
news
Life and Style
'Prison Architect' players decide the fate of inmates
tech
Life and Style
A picture taken on February 11, 2014 at people walking at sunrise on the Trocadero Esplanade, also known as the Parvis des droits de l'homme (Parvis of Human Rights), in front of the Eiffel Tower in Paris.
techGoogle celebrates Paris's iconic landmark, which opened to the public 126 years ago today
News
Cleopatra the tortoise suffers from a painful disease that causes her shell to disintegrate; her new prosthetic one has been custom-made for her using 3D printing technology
newsCleopatra had been suffering from 'pyramiding'
News
people
Arts and Entertainment
Coachella and Lollapalooza festivals have both listed the selfie stick devices as “prohibited items”
music
Sport
Nigel Owens was targeted on Twitter because of his sexuality during the Six Nations finale between England and France earlier this month
rugbyReferee Nigel Owens on coming out, and homophobic Twitter abuse
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor