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Hodge Seeks Tax Accountability of U.K. COVID-19 Loan Recipients

Posted on June 5, 2020

After U.K. lawmaker Margaret Hodge requested more tax accountability for businesses accepting coronavirus relief loans, the Bank of England published a list of large businesses that borrowed a total of £16.25 billion under a coronavirus corporate financing scheme.

Of the 53 major businesses on the list, which was released June 4, several are among the largest companies operating in the United Kingdom, including German chemical company BASF SE, which received a £1 billion loan. Other borrowers include Ryanair DAC, easyJet PLC, Mitsubishi Corp. Finance PLC, Nissan Motor Co. Ltd., and fashion retailers Burberry Ltd. and ASOS PLC.

In a June 3 letter to Chancellor of the Exchequer Rishi Sunak, Hodge, a Labour MP, recommended that only companies with a low-risk tax compliance rating from HM Revenue & Customs be granted access to the coronavirus large business interruption loan scheme (CLBILS) and the Bank of England-HM Treasury Covid Corporate Financing Facility (CCFF).

“I am deeply concerned . . . that the support packages offered by the government during the crisis are open to abuse,” Hodge wrote. “While for many these schemes will be a financial lifeline, for unscrupulous corporations they will be viewed as easy pickings. If a company does not pay their fair share in the good times, they should have no access to public bailouts when times are tough.”

Hodge also requested stronger restrictions on intracompany loans. She suggested barring corporate borrowers from paying out dividends, buying back shares, and paying executives excessively from any amount borrowed through the schemes, not just loans of £50 million or more. She also said that interest holiday conditions should be applied to any loan accessed through CLBILS and CCFF to prevent intracompany loans that allow companies to access profits on connected-party debt.

Hodge said releasing the names of the 53 companies that have benefited from CCFF loans is “a step in the right direction,” but she implored Sunak to further increase transparency.

“Why not publish information for all corporations that have received public loans, tax reliefs, or bailouts during the crisis?” Hodge wrote. “For example, it should be made clear which large companies have been claiming under the Job Retention Scheme and how much they have received.”

Businesses have borrowed more than £30 billion under government-backed loan schemes. HM Treasury statistics on CLBILS, the coronavirus business interruption loan scheme, the bounce back loan scheme, and the future fund scheme were set out in a June 2 release.

Support for denying or putting restrictions on funds for corporations that engage in tax avoidance is growing in the United Kingdom and throughout Europe. Billionaire Richard Branson, the owner of Virgin Atlantic received so much blowback for requesting a company bailout from the U.K. government that he wrote a letter defending his choice to live in the no-tax British Virgin Islands. In May, Scotland became the latest in a line of European countries to ban COVID-19 grants for companies located in tax havens.

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