Nissan settles with taxman for GBP 37m
Daily Telegraph By Roland Gribben (Filed: 12/11/2004)
Inland Revenue investigators believe they are on the verge of recovering substantial sums from three Japanese car manufactuers in Britain after settling with one of them. All three manufacturers, Nissan, Honda and Toyota, have been targeted by Inland Revenue teams as Revenue officials yesterday celebrated the breakthrough with Nissan.
Attention has focused on Nissan and Honda but Toyota, the world's biggest motor vehicle manufacturer, admitted that it too was in frame. "The investigation involves all the Japanese manufacturers. We are in discussions with the Revenue," said a Toyota spokesman.
Revenue investigators, heartened by the GBP 37m settlement with Nissan, are said to be chasing "several hundred millions of pounds".
Their aim is to increase the revenue and reduce substantial tax losses built up by the manufacturers. They claim that the trio's accounting, transfer pricing techniques and other financial practices have been at the expense of the Exchequer. They want the companies to "stump up" and eliminate or make big inroads into tax losses that can be offset against future profits.
The Japanese carmakers are just one of the sectors identified by specialist Revenue teams in a drive to increase tax contributions from global companies with sophisticated tax operations. They have achieved considerable success in investigations on cross-border pricing policies of pharmaceutical companies and are trying to make more headway in the financial sector.
Nissan, Britain's biggest car exporter, agreed to settle to avoid a costly legal battle over Revenue claims that it moved profits out of Britain to other countries where taxes are lower. The Revenue is understood to have told Nissan that the group profits had been understated by £400m. "They seem to have plucked an arbitrary figure out of the air," said one source.
Nissan's sales company in Britain has contributed £20m of the total by surrendering tax losses while the Washington, Co Durham, manufacturing plant has accounted for the balance.
The settlement dates back to 1990 when Nissan reorganised its UK operations and has no connection with the abortive Revenue claims against the late Octav Botnar who operated the original Nissan business.
Honda is in the Revenue's sights because investigators believe the company has been massaging profits made in Britain by undercharging its overseas affiliates for cars it ships to them.
Both Honda and Toyota are still arguing with the tax authorities but tax specialists say the Revenue is "bound to be encouraged" by the settlement with Nissan. The Revenue refused to comment.
Tax experts feel the Japanese manufacturers are an obvious target for the Revenue. One said: "Transfer pricing has all the tax authorities worried. When you have a global organisation moving products and components across borders there is the obvious suspicion that they are attempting to avoid tax rather than simply trying to improve efficiency."