Firm slammed over free school meal scandal is locked in £113million tax bill row

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A firm slammed over the food parcels scandal is locked in a £113million tax row, the Mirror can reveal.

Catering giant Compass, whose offshoot Chartwells was last week attacked for sending paltry meal packages to hungry families, is part of a dispute with the European Commission.

It is among a number of powerful multinationals which, the Commission ruled, were illegally given state aid by the UK Government.

The Government, along with Compass and the other big firms involved, are fighting the ruling.

Compass’s most recent annual results revealed it was fighting the £113million tax bill, despite having a current stock market value of £25billion.

Compass Group HQ is in, Chertsey, Surrey
(Image: SWNS)

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The dispute centres on reforms brought in by then Tory Chancellor George Osborne 2012 which, critics say, made it easier for big companies to get around anti-tax avoidance rules.

Compass and others were allowed to move profits generated from the interest on loans into countries with much lower tax rates than the UK.

In Compass’s case, this saved it £113m in UK corporation tax between 2012 and 2018.

In 2019, the European Commission ruled this amounted to illegal state aid.

(Image: @RoadsideMum / SWNS.COM)

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European Commissioner Margrethe Vestager said at the time: “The UK gave certain multinationals a selective advantage by granting them an unjustified exemption from UK anti–tax avoidance rules.”

The UK Government was ordered to recover the money but the appeal is ongoing.

Compass last week apologised after images of woeful food packages provided by Chartwells were shared on social media.

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Compass’s former chairman Paul Walsh was one of 103 business leaders who signed a letter praising Tory policies in 2015, at the height of the party’s austerity blitz.

George Turner, executive director of campaign group Taxwatch, said: “Compass Group may well argue that the structure they set up was encouraged by the UK government at the time, but that does not mean that using tax havens to funnel money around their business is the right thing to do.

“Sadly, far too many companies in the UK appear to think that the only responsibilities they have is to meet minimum standards whilst maximising profits.

“However, that approach can end up being a disaster for everyone else whilst costing the company more in the long run.

“If Compass Group had focused a bit more on their wider responsibilities towards society as a whole, they would not now be facing a potential tax bill of over £100m.

“They also might have avoided the insult to the families of needy children and the embarrassment to themselves from providing inadequate food parcels.”

Compass’s former chairman Paul Walsh was one of 103 business leaders who signed a letter praising Tory policies in 2015

Compass said it had finance offshoots in Ireland and Switzerland, both known for having low corporate tax rates.

The company said in a statement: “In April 2019, the European Commission alleged the UK was in breach of EU State Aid rules, and the UK Government has appealed to the General Court of the European Union against the decision.

“Like the many major UK companies which were affected by this decision, Compass complied with the UK legislation.

“If the decision of the EC is upheld, we have calculated Compass’s maximum potential liability to be £113m.”

It added: “The company does not artificially divert profits into tax havens.”

The Treasury has previously defended exemption, insisting: “We do not believe these rules are incompatible.”