Cadbury 'used Ireland to avoid UK tax'
CHOCOLATE giant Cadbury has been accused of "aggressive tax avoidance", particularly in its use of Irish subsidiaries, before it was acquired by US food group Kraft.
The 'Financial Times' has reported that Cadbury's tax strategies pre-2010 were designed to slash its UK tax bill by more than a third.
The company is accused of devising schemes with code names like "Martini", designed to engineer interest charges that could be deducted from its gross profits, thus reducing UK tax.
The schemes reportedly helped reduce Cadbury's tax on UK operations to an average £6.4m (€7.5m) a year, despite British profits of £100m (€117m) and turnover of more than £1bn (€1.17bn). At the standard rate it should have paid out about £30m (€35m) in tax every year.
The investigation is particularly critical of Cadbury's use of Irish companies for tax purposes.
It accuses Cadbury of tackling the problem of high taxes on foreign profits by turning to Ireland as it expanded, where it has owned a chocolate business since the 1930s. It says the confectionary company created a series of Irish finance subsidiaries into which it pumped £1bn of equity, intended for US loans.
The objective was to shift profits from America to Ireland in the form of inter-company interest payments. Even though Irish tax rates rose to 12.5pc in 2003, the arrangement was still favourable compared to the 35pc payable across the Atlantic.
The newspaper says the money trail is hard to follow, as Irish companies are not obliged to file accounts so long as their finances are underwritten by a parent, in this case a Dutch holding company.
But it says 2010 accounts show that two Irish trading companies – Cadbury Ireland and Greencastle – still had outstanding loans of $510m just weeks from the winding-up of their loan books.
An unnamed former senior director told the 'Guardian' yesterday that some of the schemes exposed by the 'FT' looked "pretty aggressive", but were not out of line with what "a lot of companies did".