Royal Mail 'in line for tax break'
Published 06/10/2013 | 12:16
Royal Mail is reportedly expected to enjoy a five to 10 year corporation tax break thanks to building up £2.8 billion in credits from previous years' losses.
The group, which will reveal the final details of its £3.3 billion float at the end of the week, revealed the backlog of tax credits in the fine print of its initial public offering (IPO) prospectus thanks to several years of losses and payments into its staff pension scheme.
It is expected to be able to use the tax relief to cut its corporation tax bill for up to a decade, according to The Sunday Times.
While the tax break would be allowed under tax laws, it is likely to further fuel concerns that the Royal Mail privatisation is set to see the taxpayer lose out.
But it will be another boost for investors, who are said to have been flocking to buy shares in the upcoming flotation.
A Royal Mail spokesman said: "Royal Mail adheres to UK tax law like any other responsible company and we make our required tax payments in full.
"As is widely known, Royal Mail made significant trading losses in prior years, while investing very significantly to transform its operations.
"As our prospectus makes clear this has generated tax reliefs which will be carried forward and may be utilised against any future profits and depreciation."
But he denied the group would not have to pay corporation tax for five to 10 years.
Demand for shares under the privatisation is said to be high enough for the Government to be able to sell shares at the top end of its 260p to 330p price range.
The Government is selling up to 62% of the business, with a 10% stake being handed for free to Royal Mail employees.
But Labour has raised concerns that the flotation will leave customers, taxpayers and businesses ''significantly short-changed''.
In a letter to Business Secretary Vince Cable, s hadow business secretary Chuka Umunna said: "Y ou and the Government are obliged to secure the best return for taxpayers from the IPO (initial public offering).
''It is not at all clear from the information provided in the IPO prospectus that this is the case."
He has expressed fears that Royal Mail will sell off its valuable property portfolio in a fire sale after the share listing, which he argues could leave customers facing longer trips to collect post.
Royal Mail is also facing the threat of a strike and it has been revealed that c hief executive Moya Greene has written to employees offering them £300 not to take part in industrial action .
Workers have been offered a pay increase of 8.6% over three years, including a £300 lump sum in year one if there is no strike.
The Communication Workers Union (CWU) is asking members to vote on industrial action and the ballot closes later this month.