Royal Mail’s new owners set for 10-year tax break as demand for shares soars
Published 07/10/2013 | 08:32
Royal Mail lost money for so many years under state ownership that its new private owners could enjoy up to a decade of paying no corporation tax.
The organisation has amassed £2.8bn of tax losses which it can use to offset against its future tax bills, adding further fuel to critics of its flotation, which is due on Friday.
Opponents including shadow business secretary Chuka Umunna have also pointed to the apparently low valuations of three large properties in the prospectus to claim that the government is selling off the service “on the cheap”.
However, expectations are that the shares will be priced at the top end of the indicative range.
They are forecast to be priced at 330p to 330p but the final value will not be revealed until Friday. There was so much demand for the stock that big City investors had applied for more shares than were going to be available within hours of their launch.
The government has also come under fire for what critics described as cynical timing by launching the £3.3bn float of the business shortly before postal workers could strike against it.
It emerged yesterday that Royal Mail chief executive Moya Greene had written to postmen offering them £300 each to cross the picket line. The earliest that industrial action can happen is October 23 but the threat of future strikes is still seen as one of the biggest risks in buying shares in the company.
Royal Mail said it would adhere to the tax rules of all the countries in which it operates. However, tax experts said that, based on its recent financial record, the £2.8bn losses could mean it paying no corporation tax for five to 10 years.
The privatisation is the biggest since John Major’s sale of the railways in 1996. Investment banks and brokers are expected to pocket about £50m, with lawyers and PR firms also cashing in.