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.
Business rates costing jobs, says Heathrow boss
John Holland-Kaye says business rates system is unfair and “punishes investment”
By Szu Ping Chan
Britain’s business rates system is “punishing investment” and will cost jobs and growth unless it is reformed, according to the chief executive of Heathrow Airport.
John Holland-Kaye said Europe’s busiest airport, which has the highest business rates bill in England, was faced with an unfair and “disproportionate” bill that was so large that it was beginning to affect investment decisions.
“We’re being punished for investing. We’ve created and supported 35,000 jobs while we were building [Terminal 2] and yet we have this huge tax bill on the back of it that’s completely unrelated to passenger volumes,” he said.
“That doesn’t seem fair and it disincentivises significant investment like ours which has a huge benefit for the jobs that have been created while we’ve been investing.”
Mr Holland-Kaye said Heathrow, which is in a battle with Gatwick over the right to build Britain’s next runway, paid about £168m a year in business rates. “All of us benefit from the £11bn of private money that we’ve put into the airport, but we’re paying a significantly higher level of tax as a result.”
Leading business figures and lobby groups, including the Confederation of British Industry (CBI), have said the current system, which is based on the rental value of properties, disadvantages companies with a large high-street presence and discourages investment.
Five years ago, Heathrow’s business rates bill was £93.4m, according to calculations by Paul Turner-Mitchell, a business rates expert and campaigner.
Asked if the jump in Heathrow’s business rates bill would deter investment, Mr Holland-Kaye said: “It’s become a much bigger part of our tax bill, so yes it does tie in to our investment business case.”
By comparison, Mr Turner-Mitchell’s calculations, which are based on figures from the Government’s Valuations Office Agency, show Gatwick’s business rates bill will amount to almost £30m this year.
Mr Hollande Kaye called for an overhaul of the system that linked rates to revenues.
“I would tie it to the level of business we are doing. So if we’re growing our business by 1pc per year then our council tax should be linked to that rather than to the amount of money were investing here.
“It seems disproportionate that our council tax is linked to our investment rather than to our income.”
George Osborne pledged to conduct a root and branch review of the business rates system by March 2016 if the Conservatives are re-elected. However, the Chancellor said any changes would be “fiscally neutral”, which suggests many businesses will lose out.
Last December, Mr Osborne extended the 2pc cap on business rates by a year. Increases are linked to the retail prices index, which is no longer an official statistic. The CBI has called for increases to be linked to the consumer prices index, the Goverment’s preferred measure of inflation.
Heathrow one of the largest sources of CO2 in the UK:
Heathrow is also about the 2nd largest source of CO2 in the UK. In 2010 the DfT put its carbon emissions, from departing flights, at 18.8 million tonnes of CO2. Link Page 173.
Drax power station burned around 22.8 million tonnes of CO2 in 2007 Link
As a couple of commentators say:
“Utter hypocrisy, Heathrow Airport hasn’t paid any Corporation Tax for years!
Bristol airport and Gatwick also manage to avoid Corporation Tax.”
Amazing no one bothered to raise business rates as a reason for town centre collapse.
Now an airport complains it makes the press.
John McDonnell MP condemns Heathrow Airport’s non-payment of Corporation Tax
Press Release: John McDonnell MP condemns Heathrow Airport’s non-payment of Corporation Tax
Heathrow airport has been found to have avoided paying £234 million worth of taxes.
Margaret Hodge MP, Chair of Parliament’s Public Accounts Committee criticised Heathrow airport for not having paid corporation tax on company profits. Her Committee found that Heathrow airport had avoided paying taxes totalling £234 million by offsetting some of the costs of building Terminal 5.
Mrs Hodge said that for several years the company had “made a fortune” from its UK activities, which relied on public services, adding: “For them to pretend they are only in it for the benefit of the UK economy is a touch hypocritical.”
Local MP John McDonnell said “I am absolutely disgusted that Heathrow Airport that is now in foreign hands has got away with avoiding this huge amount of taxes. Just think how we could have invested this money locally. This could have paid for the new hospital that we need in order to replace the dilapidated buildings at Hillingdon Hospital and paid for the new homes we need to tackle our local housing crisis. I am calling upon Heathrow Airport Ltd to pay the money back. They have a moral duty to pay their way in our community.”
Gatwick runway appeal ‘is hypocritical when it avoids corporation tax’
Margaret Hodge, head of the powerful Public Accounts Committee, said Gatwick should pay its “fair share” of corporation tax
Back in 2008:
Heathrow holding company has tax-free years
By Alistair Osborne, Business Editor (Telegraph)
22 Apr 2008
The Spanish-controlled company that owns Heathrow, Gatwick and Stansted airports will not pay any corporation tax for several years, potentially leaving the Exchequer £1bn out of pocket.
Accounts published this month for Airport Development and Investment (ADI) – the holding company for airports operator BAA, which presided over the shambolic opening of Terminal 5 – show that the company claimed a tax credit of £211m in 2007.
This compares with the £225m corporation tax paid in 2005/2006, the last financial year before ADI acquired the owner of seven UK airports for £16.3bn, including debts.
ADI is 61pc owned by Spanish construction group Ferrovial, with the rest of the equity held by Singaporean and Canadian funds.
The tax credit is mainly explained by 2007’s cut in UK corporation tax from 30pc to 28pc and its impact on BAA’s deferred tax liabilities of around £7bn. That accounted for £141m of the credit.
Even after adjusting for technical accounting issues, however, ADI would not have paid any tax for 2007.
That is because it has geared up BAA with so much debt that its interest bill wipes out any taxable profit.
The ADI accounts show net debt of £16.8bn and net finance costs of £874m. ADI had operating profits of £571m, after “certain remeasurements” – such as property revaluations – leaving a £297m loss before tax.
ADI is attempting to refinance £10bn of debt but BAA sources confirmed that even if the much-delayed refinancing succeeds, the holding company is unlikely to pay any UK tax for at least the next two years. A spokesman for the TaxPayers’ Alliance said: “It’s shocking that BAA is raking in cash from the British taxpayer, despite doing such a bad job.
“How on earth can the Government justify this when they are claiming there isn’t enough money to provide essential drugs on the NHS or to give hard-pressed taxpayers some relief? T5’s passengers were let down badly by BAA, so it’s insulting that they have been forced to subsidise the company as well.”
John Stewart, chairman of Hacan ClearSkies – the campaigners against the third runway at Heathrow – said: “After all the disasters of recent weeks, the public will be astonished that they appear to be subsidising BAA.”
A BAA spokesman said: “We abide by the UK tax rules. This is not an arrangement that is unique to BAA or ADI.”
The airports operator, which will today learn whether the Competition Commission is minded to break up its monopoly of major London airports, yesterday unveiled a management restructuring aimed at improving operations at Heathrow after the T5 fiasco.
New chief executive Colin Matthews is merging BAA’s corporate and Heathrow executive teams to give him more hands-on control of operations at Britain’s premier airport.
Combining the nine-strong corporate team with the Heathrow executive, led by the airport’s managing director, Mark Bullock, is expected to result in job losses among senior managers. Mr Bullock is expected to continue in his role. BAA will appoint a managing director to run its other six airports.
Mr Matthews said: “Before I joined BAA, I believed that the key priority for passengers and the company was to make Heathrow work effectively as the UK’s only global hub airport. Recent events at T5 have reinforced that view.”
The changes will be effective from June 1.