Private equity firms looking to make millions of pounds from selling the AA breakdown service have come under attack for the tiny amount of corporation tax its holding company has paid.
Unions and MPs have rounded on the owners of the AA's holding company, Acromas, which also houses Saga financial products, for paying tax of 2.7% on profits since its creation in 2007.
The company's accounts show that it paid a combined £67.1m in its five-year history, on total operating profit of £2.49bn made from a turnover of £8.75bn during the period.
The revelation will spark further outrage about the extent of UK tax avoidance by corporations, which last week saw representatives of Google, Starbucks and Amazon grilled by the public accounts select committee. UK corporation tax is set at 24% but is expected to fall to 23% next year.
Last week business secretary Vince Cable called on the chancellor to use his autumn statement to "get to grips" with companies that are "systematically abusing" the UK tax system.
Paul Maloney, regional secretary of the GMB union, which counts many Acromas staff as members, said: "The chancellor should use this example to end tax relief on private equity loans, which is skewing the corporate sector towards borrowing rather than equity, and leading to an erosion of the tax base. The loss of tax has been huge.
"Taking advantage of this tax relief is what drives private equity. It has led to excessive leverage across the economy in the likes of the AA, Southern Cross, Four Seasons Healthcare, pub companies and Boots as well as a loss of tax. There is now a wall of debt of £111bn that buyout companies in the UK will have to refinance over the next five years."
Acromas has hired investment banks to advise it on a sale of the company that could value it at £6bn to £8bn, compared to the £6.3bn paid for the AA and Saga.
The company's private equity owners, Charterhouse, CVC Capital Partners and Permira, have been able to pay low levels of corporation tax because profits are wiped out by interest payments on the debt required to buy the AA and Saga.
Acromas has also made £248.1m of acquisitions in the healthcare sector in the past three years, including the purchase of Nestor Healthcare, which specialises in home care, maintaining Acromas's debt mountain at £4.1bn.
Private equity ownership of the AA has been controversial from the start. About 2,800 AA staff, including 600 patrolmen, have been laid off. In 2010 AA workers voted to strike for the first time in a row over pensions. Acromas's combined pension funds are currently running at a deficit of £146.3m.
The most recent accounts for Acromas reveal the company made a payment of £421m to its shareholders while paying £47.3m of corporation tax. It paid £14.3m and £5.5m in tax in the two previous years and none in the first two years.
An Acromas spokesman confirmed it had paid only £67.1m in corporation tax but added: "We pay all our taxes in the UK. Overall, our operations paid over £300m in taxes of one kind or another."
Acromas, which describes itself as a "great British success story", is one of the UK's largest private companies, employing 38,000 staff. Its management team owns 22% of the company.
Andrew Goodsell, chief executive of Acromas, said in the company's most recent accounts: "Our financial strength means we have been able to acquire complementary businesses. Our record level of investment has been funded from the cash our business generates."
Goodsell received a pay package of £1.51m according to the latest accounts, up from £1.47m the previous year.
Acromas said any flotation or sale of either of its divisions was unlikely before 2014. A £1.4bn tranche of debt does not mature until 2015, giving the company flexibility to evaluate strategic options.
A Revenue and Customs spokesman said: "For legal reasons we cannot comment on the tax affairs of individuals or businesses.
"However, HMRC ensures that they pay the right tax in accordance with UK tax law. We employ specialist tax professionals to ensure that businesses and individuals pay the right amount of tax and address specific issues that arise with those concerned to ensure that is the case."
