Call for Revenue and Customs probe into Ineos' 'obfuscating' tax affairs

The formal request follows questions about apparent accounting contradictions in Ineos' 'Chemical' accounts which simultaneously paint both a gloomy and upbeat assessment of the company's finances and future profitability.

Unite says the holding company's recent relocation to Switzerland together with the establishment of a seemingly 'new' UK company, whose purpose is unclear, make it particularly difficult to get an accurate picture of the situation facing Grangemouth, Scotland's premier industrial site presently in extreme shutdown as the company seeks to force through a raft of cuts to pay and conditions.

Writing to HMRC, the union expressed concern over the numerous accounting reorganisations at the company, saying that it clouded transparency and led to questions over whether the reorganisations were being used by Ineos to move tax arrangements and liabilities.

Writing to Chris Davidson, head of the anti-avoidance group for the HMRC, Unite general secretary Len McCluskey said: “The current uncertainty as to the true nature of the company's UK activities is causing genuine confusion, not least to the Ineos employees we represent, as well as other stakeholders.”

He went on to add that:

“Analysis of the company's accounts is in itself made difficult by the sheer number of re-organisations undertaken by the Ineos Group. However, analysis of the latest 'Chemicals' accounts (2012) shows a fundamental paradox worthy of investigation at the heart of the company's accounting position.

“The latest reorganisation, following the holding company's recent exit to Switzerland, has seen another 'new' UK company set up by Ineos - the remit of which remains unclear. Ineos Grangemouth Limited was incorporated on the 19th September 2013 and it is feared that the new entity may be used to further obfuscate the true position of Ineos' UK activities.

Concluding he said:

“My union has employed expert external analysis for the purpose of trying to better understand Ineos at a time of great uncertainty. On the back of our findings I now urge the HMRC to launch a formal investigation into the affairs of Ineos.”

Notes:

The letter in full is as follows:

Dear Mr Davidson,

As the trade union representing INEOS employees in the UK, Unite the Union is formally requesting that the HMRC open an investigation into the tax affairs of the INEOS Group and particularly into those of Ineos Chemicals Grangemouth Limited ('Chemicals'). The current uncertainty as to the true nature of the companies UK activities is causing genuine confusion, not least to the INEOS employees we represent, as well as other stakeholders. Unite believe that there are clear grounds for a HMRC led investigation:

INEOS has undergone numerous accounting reorganisations in recent years making transparency difficult and leading to an underlying concern that such reorganisations are being used by INEOS to move tax arrangements and liabilities

Analysis of their latest 'Chemicals' accounts gives grounds to believe that the company is planning to fundamentally change the nature of its trade, whilst at the same time attempting to realise significant deferred tax assets which have been accrued from previous activity

The latest reorganisation, following the holding company's recent exit to Switzerland, has seen another 'new' UK company set up by INEOS - the remit of which remains unclear. INEOS Grangemouth Limited was incorporated on the 19th September 2013 and it is feared that the new entity may be used to further obfuscate the true position of INEOS's UK activities.

Analysis of the company's accounts is in itself made difficult by the sheer number of re-organisations undertaken by the INEOS Group. However, analysis of the latest 'Chemicals' accounts (2012) shows a fundamental paradox worthy of investigation at the heart of the company's accounting position.

The company has written off most of its assets (£389.2 million) - implying that it is struggling to remain a viable long-term business. Paradoxically, they have also announced that they expect to realise a deferred tax asset of £117.3 million suggesting that, at the current UK Corporation Tax rate of 23%, they expect to make realisable profits of circa £510 million in the foreseeable future. On top of this striking contradiction, the company has also chosen to write-off an inter-group loan of £464.5 million from INEOS European Holdings Limited. To do this they would have to have given commercial justification. The apparent justification is the company's inability to repay the loan. This in turn, is theoretically due to issues related to the future viability of the company. However, this is clearly inconsistent with the announcement that the company plans to make significant profit over the coming years in order to fully realise the deferred tax asset.

These combined events bring into question whether both the latest INEOS reorganisation and the asset write-down are being driven by legitimate business purposes, particularly given the use of companies in apparently non-operating countries, or whether they are for the moving of tax liabilities and/or inter-group shifting of profits. It is clear that such company activity could at the very least constitute a change to the fundamental nature of the business and therefore cast doubt as to the viability of the company's expectation to realise significant deferred tax assets.

My union has employed expert external analysis for the purpose of trying to better understand INEOS at a time of great uncertainty and on the back of our findings I now urge the HMRC to launch a formal investigation into the affairs of INEOS.

Yours sincerely,
Len McCluskey
General Secretary

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