A group of businesses in the Welsh town of Crickhowell have gone offshore as part of a campaign to try and get HMRC to change tax laws.
The Welsh town of Crickhowell is spearheading a unique campaign to get HM Revenue & Customs (HMRC) to change the laws so companies can stop using loopholes to reduce their tax bills. And it's now generating support from towns around the UK.
Shop owners from the Powys town are setting up a company using the same loopholes that multi-national corporations like Amazon, Google, Vodafone and Starbucks use.
Essentially, they’ve taken themselves offshore.
The group starred in a BBC 2 documentary called The Town That Took On The Taxman, where they were filmed travelling to the Isle of Man and Amsterdam to find out more about it.
Caffe Nero hasn’t paid any corporation tax since 2007 by employing these sneaky, but perfectly legal, tactics. Last year Amazon paid £11.9 million in tax on UK sales of £5.3 billion while Facebook only paid around £5,000 in the UK.
This isn’t the first time the Welsh town has made the headlines for oppposing corporate giants. Last year, the townsfolk successfully kept the Co-operative supermarket off high street by raising £500,000 and buying the Grade II-listed Corn Exchange pub that it was going to replace.
The high street in Crickhowell is largely made up of independent retailers, reminiscent of high streets of the recent past. The only chain shop they have is a Boots.
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How it’s done
The business owners start by visiting a corporate service provider to set up their own company and take it offshore.
Even though there’s 17,000 pages on the subject of tax law to scour, it’s surprisingly easy to do.
They set up a company in the Isle of Man using what's known as the ‘Dutch sandwich’ loophole. That means they build up a company sandwiched between the UK and a tax haven, therefore taking advantage of more generous tax rules, and using intellectual property (brand name, logos and the like) to reduce the profits they declare and in turn reduce the corporation tax they pay.
There is a witholding tax on intellectual property, but again there are ways to get around it.
Around 15,000 companies in the Netherlands and eight trillion euros a year go through these systems.
Throughout the programme, the group emphasised that they don’t want to dodge tax themselves, they just want to put pressure on HMRC and encourage other towns to follow the same process if the taxman fails to remove the legal loopholes for large corporations.
The director general of business tax at HRMC said it would be more likely to be taken seriously as multinational corporations, but an independent adviser said it could increase its chances if it spread the Fair Tax Town message.
There was a worry among other residents that roads, schools and hospitals would suffer if everyone stops paying corporation tax.
Crickhowell’s rebellious movement has already been taken up by other towns, with Hebden Bridge in Yorkshire and Leek in Peak District showing their support.
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What you can do to help
The Fair Tax Town is hoping to spread its message across the country, with the ultimate goal of changing the tax system.
To get more of an idea of what the campaign hopes to achieve, visit the Fair Tax Town website, have a look at the brand handbook and sign the pledge.