Barclay brothers drawn into tax controversy over Ritz investment

 

A delayed Panorama investigation into the billionaire Barclay brothers will claim that London's Ritz hotel – one of the jewels in the crown of the twins' property portfolio – has not paid any corporation tax since it was acquired by them 17 years ago.

The BBC documentary, whose broadcast was delayed by the former Director-General George Entwistle, is due to go out tonight after it was given the go-ahead by the corporation's acting boss, Tim Davie, and will focus on the tax affairs of Sir David and Sir Frederick Barclay and their companies.

The programme will highlight the case of the Ritz, which made a profit of £6.7m in 2010. The BBC said an analysis of the Ritz's accounts shows it has used tax relief to reduce its corporation tax bill to nothing while also reinvesting profits. There is no suggestion there is anything illegal in the arrangement but Panorama said a zero corporation tax bill was in contrast to the pursuit by another Barclay business, the catalogue company Littlewoods, of a VAT rebate from HMRC potentially worth £1bn.

The publicity-shy brothers, who also own the Telegraph newspaper titles, told the BBC that they are now not involved with the day-to-day running of the UK companies after retiring to the tax haven of Monaco 20 years ago. The Ritz, Littlewoods and the Telegraph group are controlled by offshore trusts, whose meetings are attended by one of the brothers, the BBC said.

In a statement, Sir David said: "We have not attended office, management or board meetings in the UK since leaving the country. My brother and I have no editorial, political or economic power in the UK."

Littlewoods, which was bought by the twins in 2002, has previously won a VAT rebate and interest totalling £472m from the UK tax authorities for payments dating back to the 1970s. But since the takeover by the Barclays, the company has issued legal proceedings to seek a further £1bn in compound interest in a test case which could lead to similar claims from other companies.

Nadine Dorries, the Conservative MP, said she was surprised at the size of the claim by the brothers' catalogue company. She told the BBC: "They're incredibly wealthy men... I think it is just utterly appalling."

Sir David's son, Aidan Barclay, who manages the UK businesses, said the HMRC had publicly acknowledged it took tax incorrectly from Littlewoods, adding its directors had a legal duty to recover the company's money.

The Ritz, which is estimated to be worth at least £625m, has proved a successful investment by weathering the economic crisis with improved turnover and profits. Aidan Barclay said the hotel had not paid dividends to its shareholders and profits had been reinvested into the business.

He said: "The Barclay family members and their companies abide by the law and pay the taxes required by UK law and the laws of other relevant countries." The BBC said the Panorama programme would also look at the relationship between the Barclays and the Channel Island of Sark, where the brothers have built a castle on the neighbouring islet of Brecqhou.

Stephen Boxall, Managing Director of The Ritz said: “In response to claims in the media regarding non-payment of corporation tax, I reiterate a previous statement by our owning company that The Ritz is a reputable and law-abiding business and pays the taxes required by UK law.

“Since the Hotel was acquired in 1995, in excess of £50 million has been spent on refurbishment, whilst maintaining the standards of excellence and quality. These costs are lawfully off-settable against trading profits. During the period since 1995, The Ritz has not paid dividends to its shareholders.”

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