Private equity companies have come under a fresh attack for enjoying tax breaks.
This time it was the turn of merged firms Saga and the AA, which defended BBC accusations that they incurred zero liability for corporation tax last year.
Saga, which sells holidays and other products to the over-50s, announced its merger with motoring giant AA last month, creating a company with more than 11,000 employees.
Saga said in a statement that it was treated the same as any other UK company. “All companies that borrow money can deduct interest from their taxable profits. The economy benefits because banks which receive that interest are subject to corporation tax.
“Saga has grown substantially under private equity and makes a valuable contribution to the UK economy in terms of jobs and services,” the company said.
A number of private equity companies including Carlyle Group and Permira, which are behind some of the biggest UK takeover deals, including that of the AA, have appeared before the Treasury Select Committee as part of an ongoing investigation into whether the industry needs to be more transparent and tightly regulated.
Trade unions also waded in with further accusations after branding private equity chiefs as “arrogant” and “evasive” following their initial appearance before the committee last month.
Paul Maloney, GMB national secretary for the AA, called on the Treasury Select Committee to address the “abuse” of company and tax law.
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He said: “GMB has argued that MPs should plug the gap and stop borrowing for leverage buyouts being eligible for tax relief. GMB has also been arguing that the privilege of limited liability should be withdrawn from people profiting from leverage buyouts, and that they should personally be responsible for liabilities such as the £2bn in the 94 insolvent pension schemes with links to private equity.
“The AA is a good case study in point. The multi-millionaire elite plan to increase borrowings to £4.8bn at Saga/AA while they extract £2bn of this debt to divide as ‘profits’ among themselves. Of course, the new organisation will pay no corporation tax for the foreseeable future, as this debt has to be serviced,” he added.
