Burberry Returns Millions of Tax Breaks: The fashion giant is the first non-essential retailer to repay business installments – which is putting pressure on other big companies
- The move will make London-based Burberry the first “non-essential” retailer to pass taxes on business premises that are forced to close due to lockdown rules
- So far, few companies that acted during the lockdown have given up the corporate tax breaks available to all retail and hotel businesses
- Other chains that have stayed open will now come under increasing pressure to follow the lead of the luxury retailer
Luxury goods giant Burberry willingly pays the finance tax it saved from an emergency vacation with business installments – even if its stores remain closed.
The surprise move will make London-based Burberry the first “non-essential” retailer to pass taxes on business premises that have to be closed due to lockdown rules.
So far, few companies, including Tesco and Sainsbury’s supermarkets, have given up tax breaks for all retail and hotel businesses.
Surprise: The move will make London-based Burberry the first “non-essential” retailer to pass taxes on business premises that have to be closed due to lockdown rules
Other chains that have stayed open will now come under increasing pressure to follow the lead of the luxury retailer.
In the past few days, Burberry has also repaid a taxpayer-backed £ 300 million loan a month early, suggesting confidence in the UK’s economic recovery and its own prospects for the year ahead is growing. The company said the early settlement of the loan and the decision to pay business installments – despite Chancellor Rishi Sunak’s 12-month aid package announced in March last year – was “the right thing”.
Burberry also declined to accept government vacation pay last year.
The loan was part of a Treasury-backed aid package to large companies hit by the pandemic. Around 50 companies have more than £ 12 billion outstanding loans under the Covid Corporate Financing Facility, including a number of overseas companies.
Burberry’s London store has one of the highest bills in the country. It will hand over an estimated £ 6 million for its six standalone stores and three outlet locations, despite the 12-month retail and hospitality fee waiver until April.
The plan makes Burberry, famous for its tartan check, the best known retailer outside of the grocery and DIY sectors to return the prizes.
Altus Group’s analysis shows that 14 retail groups returned £ 2.2 billion to the Treasury Department.
The Howdens chain of carpenters repaid £ 8 million in November, along with £ 22 million in vacation pay. This was followed by interest repayments from Tesco, Morrisons, Asda, Sainsbury’s, Aldi, Lidl and the discounter B & M.
Others, including Waitrose, Co-op, M&S, Boots, Poundland, Island, and The Range, have not offered to pay business rates, although some or all of their stores are still open.
There was growing unease about the use of government subsidies after blanket measures by the Treasury Department resulted in companies benefiting from public generosity even after continuing to operate throughout their operation.
The Sunday mail revealed last month that overseas giants paid their investors £ 5 billion in dividends after taking out cheap Covid loans issued by the Bank of England and guaranteed by taxpayers.
The US owner of Boots gave Italian billionaire Stefano Pessina a profit of nearly £ 50 million just days after the chemist pulled £ 300 million from the loan program. The Walgreens Boots Alliance is set to give Pessina an additional £ 50 million in the coming weeks, although the debt has not yet been paid.
A source in Whitehall said at the time: “This can be acceptable [under the scheme’s rules], but it’s not exactly what the scheme means. ‘
Street fighter Bill Grimsey said, “It was necessary to help companies that have suffered. However, there is no need to pass money on to companies that traded during the crisis and, in some cases, traded better than before. These were blanket guidelines, and those who don’t need them should return the money now. ‘
Grimsey said all the companies that returned Business Rate Holiday money are listed on the London Stock Exchange. Some will be careful to avoid the wrath of shareholders at annual meetings later this year – an issue that does not affect private companies.
The Range, owned by billionaire Chris Dawson, has been criticized for accepting about £ 36million from deal installments despite the fact that stores were open and it was revealed in December that he made £ 47million the previous year.
In September, Burberry raised £ 300 million through a “sustainability bond” to investors to fund “sustainable projects” and “drive social and environmental improvements.”
The company said, “We believe this is the right thing to do in the context of our improved trading performance and financial stability in the third quarter, which will be ensured through strict cash management and the introduction of long-term funding through our sustainability bond.”