Private equity-backed supermarkets Asda and Morrisons did not pay a penny of corporation tax last year, as new disclosures shed light on how buyout firms minimise tax by loading companies with debt. In the decade before they were bought out by Issa brothers, they paid more than £200 million of corporation tax a year on average between them.
However, since the buyouts their profits have been reduced to losses, largely due to hefty interest payments on the new debt being loaded onto their balance sheets. As corporation tax is levied only on profits, they pay nothing.
Accounts filed by Asda at Companies House this month showed its finance costs, principally interest payments on debts, came to £395.5 million, pushing Britain’s third largest supermarket to a £74 million pre-tax loss. Meanwhile, Morrisons shelled out £406 million on financing costs, which contributed to a £1.3 billion pre-tax loss. Asda was acquired in 2021 by Issa brothers, who made a fortune in petrol forecourts, and London based private equity firm TDR Capital for £6.8 billion. It is now saddled with £4.8 billion of net debt.