Butter firm loses court tax action

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CUSTOMS AND Excise won a High Court order yesterday that stops the New Zealand dairy giant Anchor Foods from selling its assets to avoid an alleged pounds 270m import duties bill.

But Customs had to give Mr Justice Neuberger an undertaking to pay damages to Anchor if the dairy company eventually won the action and showed that it had suffered losses. The judge also granted leave to both parties to take his rulings to the Court of Appeal.

Anchor, a wholly-owned UK subsidiary of the New Zealand Dairy Board, wanted to sell off all of its assets for pounds 9m to a new NZDB company in the UK created for the purpose.

Customs claim this is a "gross undervaluation" of Anchor, designed to leave behind the import duties debt. Its own accountants have valued Anchor at pounds 30m to pounds 100m.

The judge told Anchor, which is to challenge Customs' demand for import duties at a VAT and Duties Tribunal, to provide more information on its value to Customs, which would then be "duty bound" to tell the accountants it was employing.

If there was any reconsideration of the value of the company, the accountants employed by Customs would also be under a duty to tell the court.

Graeme Milne, the Anchor chairman, said: "We are disappointed with this decision. But the judge left it open for us to challenge the injunction and we are confident about the valuation of the company and are sure the whole matter is a proper transaction on our part."

Customs came to the High Court on Thursday seeking the order to freeze Anchor's assets, which employs 413 people in the UK, until the hearings on the import duties are completed.

David Pannick QC, for Anchor, had told the judge the company had to sell its assets so it could "maintain its credibility" with banks and suppliers.

Mr Pannick said Mr Milne agreed that his company was selling the business to New Zealand Milk (NZM) because of the debt claims by Customs.

Richard McCombe QC, for Customs, had told the judge: "The company only seems to make a profit of less than half a per cent before tax. How does it not make a profit when it is known to have 30 per cent, by far the largest share, of the UK dairy produce market."

The sale to NZM would leave behind "only the debt owed to Customs".

He added: "The proposed transfer appears to have no commercial purpose other than to rid the business of that debt."

Mr McCombe also questioned whether "a significant part of Anchor's profits are repatriated to New Zealand and not reflected in Anchor's profit figures".

Mr Justice Neuberger said in his ruling he was "sceptical" about the Anchor valuation evidence from the Customs accountants. But he said the injunction would not on the face of it damage Anchor business.

"This is not a case of an arm's length sale by the defendant [Anchor] of its assets on the open market. It is the transfer of the whole of AFL to a new party formed for that purpose and owned by the company, which effectively owns AFL."