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
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

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

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power