And the airport’s chiefs have paid themselves a whopping £3billion in dividends in five years.
Rules limiting how firms can cut tax bills due to large debt interest payments began in 2017 but the Treasury has given an exemption for infrastructure projects like Heathrow.
Think-tank Taxwatch has calculated the exemption is worth £120million annually to Heathrow’s owners, which include the governments of China, Qatar and Singapore.
Taxwatch said: “In the case of Heathrow, the benefits of the exemption appear to flow overwhelmingly to the owners of the company.”
Revenues at Heathrow have risen to £2.9billion but its owners have paid little corporation tax due to massive debts.
Between 2007 and 2014 the group reported a total pre-tax loss of more than £2billion, and paid just £15million in corporation tax.
In the past three years it declared pre-tax profits of more than £1billion, leading to tax payments of £122million.
The airport said: “Heathrow complies fully with the letter and the spirit of UK tax law. All of our profits are subject to UK tax and we do not operate any tax avoidance measures.”
It added it is also one of the nation’s largest business rate payers.
George Turner, of Taxwatch, said: “The company was bought using a huge amount of debt.
“Instead of paying back the debt themselves, the new owners managed to push this liability on to Heathrow, making the company liable for large interest payments… The large debt repayments wiped out the company’s pre-tax profit.”
He added: “But over the last 10 years, Heathrow has consistently made healthy profits on its day to day operations. In fact in recent years it managed to pay dividends of over £3billion to owners.”
Sunday Times reports how Heathrow has paid its owners dividends of £2.1 billion since 2012 – but just £24 million in Corporation Tax
The Sunday Times reports that Heathrow has paid its owners back £2.1 billion in dividends, starting in 2012. But it has only paid a total of £24 million in corporation tax since 2006, with that payment being last year. Heathrow’s owners are rewarded whenever the value of the airport increases. If new airport infrastructure is built, the passengers pay for it through the £20 cost on their ticket (and other spending), and the owners benefit.. The CAA calculates how much is spent on investment, and allows Heathrow’s investors to earn a return on the total. The more Heathrow spends, the more its backers can earn. If Heathrow was to spend £17.6 billion on its expansion, the value of the airport would be considered to have increased that much. Due to the huge debts Heathrow has (£12.5 billion out of the £16 billion Ferrovial paid in 2006) the airport’s banks prevented dividends to owners, until 2012. They got £240 million in 2012, which has risen to £2.1 billion. Some of the proceeds of the sale of Gatwick, Edinburgh etc has been used for dividends. The Sunday Times says: …”with a debt-to-assets ratio of about 85% is one of the most heavily indebted airports in the world.” Heathrow will have to recoup the money by high passenger charges, years before the runway is built and open, as otherwise Heathrow’s massive investors are not prepared to take the financial risk. Heathrow is no longer a company quoted on the stock exchange, but that could happen in future.
John Holland-Kaye complains Heathrow pays too much in business rates (while paying little Corporation Tax)
John Holland-Kaye is complaining that the £168 million per year it pays in its business rates is too high, and it is “punishing investment.” He claims it is risking “jobs and growth” and it should be reformed. Mr Holland-Kays says Heathrow has the highest business rates bill in England, and the cost is so large that it was beginning to affect investment decisions. (Heathrow is also one of the largest emitters of CO2 in the country – not far behind Drax power station). Heathrow has paid little corporation tax for many years, as it invests money in its infrastructure. This benefits its overseas owners, but means the company does not make a profit – hence avoiding UK corporation tax. Heathrow argues that the £11 billion of investment, from its foreign owners, for its infrastructure benefits people and businesses in the UK, so other businesses pay more tax …. The foreign owners hope to make a good return on their investment. On the level of business rates, Mr Holland-Kaye says the level or rates “disincentivises significant investment like ours which has a huge benefit for the jobs that have been created while we’ve been investing.” Five years ago, Heathrow’s business rates bill was about £93.4 million. Gatwick’s bill is about £30 million this year. George Osborne pledged to conduct a review of the business rates system by March 2016 if the Tories are re-elected.
Gatwick Airport paid no Corporation Tax in three years
Gatwick Airport has a £1.2 billion capital investment programme to improve its infrastructure and facilities. But it paid no corporation tax for three consecutive years despite making £638m in profit before tax. Gatwick tried to defend this position, saying: “Whilst year on year we have lessened our financial losses we have yet to make a profit after tax. As a result the airport has not paid corporation tax …Our current £1.2bn capital investment programme and existing asset base, together with the associated debt structure, result in depreciation and interest costs which reduce our operating profits to a loss before tax.” In the 2012/13 year, Gatwick Airport made £227.1m profit before tax, a 2.5% increase, as it benefited from flights to new destinations in China, Russia, Indonesia, and Turkey. Despite this, it reported a net financial loss of £29.1m, citing asset depreciation and £226.7m of capital investment in the year. Corporation tax is only levied on a company’s net profit. In the UK the corporation tax rate is 23%. Under UK tax law, corporations can claim tax allowances on certain purchases or investments made on business assets. Campaign group UK Uncut estimates that clever accounting rules and complex tax avoidance schemes cost Britain £12bn annually.