The global megacompanies supplying some of Britain’s most popular meat brands, including KFC, Nando’s chicken and Sainsbury’s organic range, appear to have been using offshore companies that allow them to avoid paying millions of pounds in tax in the UK.
An investigation by the Guardian and Lighthouse Reports has found that two companies – Anglo Beef Processors UK and Pilgrim’s Pride Corporation (owned by Brazilian beef giant JBS) – appear to have reduced their tax bill by structuring their companies and loans in a way that allows them to take advantage of different tax systems, in what one expert has described as “aggressive tax avoidance”.
These practices are not illegal, but they have proliferated over the past couple of decades as multinational companies and their accountants spot opportunities to reduce their tax bills. Many argue that complicated financial structures can allow some companies to avoid paying their fair share of tax. And that, they say, leads to falling income for national governments as taxpayers are forced to pick up the tab.
In this instance, the meat companies concerned have branches both in the UK and in the Netherlands and Luxembourg, which have different tax regimes. By lending money from a company in one country to a related company in the other, and then borrowing it back at a different interest rate, the companies can significantly and legally cut their tax bills.
A tax expert suggested the strategies used by Anglo Beef Processors UK and Pilgrim’s Pride Corporation amounted to “aggressive tax avoidance” and, while not illegal, were “inconsistent with good corporate citizenship. And the public, who are customers of all these meat companies, doesn’t like it.”
The Guardian and Lighthouse Reports estimated that the two meat companies appear to have avoided paying tax on more than £160m.
Both companies said they were tax compliant in all the jurisdictions in which they operate.
UK’s top beef producer
Anglo Beef Processors UK (ABP UK) runs the ABP Food Group’s UK beef operation and is the UK’s top producer of beef. It is a leading supplier of meat to UK supermarkets through own-label and branded products.
ABP UK appears to have transferred interest payments to another company in the ABP Food Group – Trojaan Investering BV – based in the Netherlands, according to Trojaan’s publicly available annual reports published by the Dutch Business Register.
In its annual reports, Trojaan Investering BV describes itself as a financing company and says it is part of the ABP Food Group. Its reports also say the company has no employees.
Its 2017 annual report detailed a loan of £63m given to ABP UK at an interest rate of 5% and repayable in December 2022. This would equate to £3.15m in interest paid each year by ABP UK to Trojaan, which would be deductible from its UK tax bill.
The report shows Trojaan took out interest-free loans from other group companies based in Ireland and Jersey.
According to its annual reports between 2013 and 2017, Trojaan made €118m (£103m), almost all of which was from interest on loans to other group companies owned by the ABP Food Group. Between 2013 and 17, its reports appear to show Trojaan paid €1.1m (£960,000) in tax, an average effective tax rate of 0.9%.
As an unlimited company, ABP UK is not required to file public accounts.
A spokesperson for ABP said: “We have been and remain tax compliant in all jurisdictions in which we operate. We have no further comment to make.”
World’s biggest meat company
Pilgrim’s UK and Moy Park – both part of the US-based Pilgrim’s Pride Corporation – currently control 25% and 30% of the UK pork and poultry markets respectively, according to their websites, and are both majority owned by the world’s biggest meat producer, the Brazilian beef giant JBS.
The UK holding company of Pilgrim’s UK and Moy Park – called Onix Investments UK Ltd – appears to have made interest payments totalling $172.8m (£147m) to a group company based in Luxembourg called Sandstone Holdings over a four-year period between 2017 and 2020, according to publicly available annual reports filed in Luxembourg.
According to its annual reports, Sandstone Holdings appeared to lend money to Onix at 6% and 7.5% interest between 2017 and 20, but appeared to borrow money from other companies owned by the group interest-free.
Sandstone Holdings recorded profits of $160m (£141m) between 2017 and 2020 and appeared to have paid $299,000 (£220,000) in tax, according to its company reports, an average effective tax rate of 0.19%. Sandstone Holdings had no staff costs in that period, suggesting that it didn’t employ anyone.
In response to the use of offshore companies and the deducting of interest payments to them by ABP UK and Pilgrim’s Pride Corporation, Reuven Avi-Yonah, a professor of law at the University of Michigan Law School, suggested there was “no question that this is aggressive tax avoidance”.
“These companies get financed by 0% loans and they pay very little tax because they’re holding companies and Luxembourg and the Netherlands apply special taxing rules to holding companies in order to attract business,” said Avi-Yonah, who is also a former consultant to the Organisation for Economic Co-operation and Development (OECD).
Alex Cobham, CEO of the Tax Justice Network, suggested that “this gives all the appearance of tax avoidance, designed to prevent the declaration and taxation of profits in the location of the underlying real activity – ie, the place where the profits actually arise. What I may consider abusive is not necessarily unlawful, however, such are the failings of the international tax rules.”
A spokesperson for JBS USA and Pilgrim’s said: “Pilgrim’s and its subsidiaries work to ensure compliance with all tax laws and regulations of the countries in which the companies operate, as well as openness and transparency in the approach to dealing with tax authorities.
“In the UK, Pilgrim’s has invested approximately £2bn since 2017 in acquisitions and capital expenditures, and it is focused on continued investment in the region.”
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