Budget store bosses pay themselves millions through tax havens
Owners of UK’s fastest growing discount chain are lauded by MPs and renowned for their lavish parties. But we reveal . . .
BOSSES of Britain’s fastest-growing discount chain have funnelled more than £150m through tax havens in Luxembourg and the Cayman Islands, the Mail can reveal.
B&M, which has more than 500 outposts around the country and boasts former Tesco boss Sir Terry Leahy as chairman, has paid £152.6m in dividends in the past three years into a holding company in Luxembourg, despite having no shops in the country or employing any workers there.
Leahy, meanwhile, who stepped down from Britain’s biggest supermarket in 2011, has his stake in the company held through a US investment fund which is registered in the Cayman Islands.
With its distinctive purple and orange store fronts, B&M was built by brothers Simon, Bobby and Robin Arora. It has developed a reputation for selling lowcost goods to cash-strapped families.
In the past 13 years it has expanded hugely, with 3m shoppers a week passing through its doors, and is seen as a rival to established giants Poundland and Wilko. B&M now boasts 522 stores and is growing rapidly in the home counties and Europe.
Meanwhile, the Arora brothers have become multi-millionaires with an estimated fortune of £1.9bn. They are beneficiaries from the tens of millions of pounds of dividends paid through the Luxembourg business.
There is no suggestion the brothers or Leahy have avoided paying tax, but John Christensen, chairman of the Tax Justice Network, said: ‘The situation at B&M raises questions about why they chose to be domiciled in Luxembourg because it’s not a place where many people choose to live. In many cases, complexity is introduced primarily to create opportunities for avoiding tax.’
ASPOKESMAN for B&M said the company was based in Luxembourg because it had aspirations to be a panEuropean retailer and it made ‘commercial sense’.
‘Luxembourg is a large, established treasury and corporate finance centre for pan-European groups and is within the EU,’ he said.
B&M Retail Group was founded in 1978 in Lancashire, but its major expansion happened when the Arora brothers took over in 2004.
At the time it had just 21 discount stores and a turnover of £65m. They transformed the shop by shipping products directly from Asia and focusing only on best-selling lines.
Filling the void left when Woolworths crashed off the High Street, it attracted families with its eclectic mix of everyday products. It joined a handful of retailers, including Poundland, Aldi and Lidl, in expanding rapidly while the big supermarkets and other traditional chains struggled.
Last month B&M revealed it had experienced a bumper Christmas trading period, with sales up 20.5pc to £789.1m in the three months to Christmas Eve. It sold 6m festive crackers alone.
The chain also operates 73 stores under the Jawoll brand in Germany. In 2012, its rapid growth caught the attention of US investor Clayton, Dubilier & Rice. It appointed Leahy as an adviser and bought a 60pc stake in B&M. This earned the brothers £380m.
Clayton, Dubilier & Rice is tucked away in the Cayman Islands, a notorious tax haven. Leahy, 60, who still acts as an adviser to CD&R, stands to benefit from advantageous tax treatment of any money received from B&M that is paid through this firm. Two years after the CD&R deal was struck, B&M floated on the London Stock Exchange – handing the Aroras (pictured above with former prime minister David Cameron)
a £1bn windfall. Over two years, four dividends of £32m, £41m, £48.3m and £31.3m, have been paid out by B&M into this tax haven. Because of the complicated structure of the company accounts it is not possible to see where the money goes from here. Had the dividends been paid in the UK, tax would have been payable on any handed to shareholders.
The Luxembourg holding company doled out £148m in dividends to shareholders in just one year. These include a number of institutional investors who will have bought shares when the company listed on the stock market in 2014. But another company called SSA Investments, also domiciled in Luxembourg, holds almost 21pc of B&M’s shares and received some of this cash. SSA Investments is owned by Simon and Bobby, who each have a 50pc stake. While the money has poured in, the Arora brothers have been able to live an extravagant lifestyle. They are the sons of an Indian migrant who arrived in Britain in the 1960s and became a market trader.
When Robin, 33, married his fiancée Esha in 2015, the couple chartered a private plane to fly their guests to Ibiza for a Champagnefuelled bash. Simon, 47, has two daughters with his wife Shalni, 45. Described as slick and intelligent, he runs B&M and received a 299pc rise in his salary to £575,000 last year, which took his total package to £601,638. Bobby, 44, is trading director and is credited with transforming the business with savvy purchases. Luxembourg’s opaque and complex tax rules have helped big firms such as Pepsi, Ikea, Accenture, Procter & Gamble, Heinz, JPMorgan and FedEx avoid massive tax bills – all perfectly legally. In its prospectus ahead of the flotation in 2014, B&M said: ‘The company is a fully taxable company resident for tax purposes in Luxembourg.’
B&M Retail does pay the full rate of corporation tax in the UK on its profits. In the year to March 26, 2016, it made £168.1m in profit and paid £27.9m in tax, according to the latest accounts posted on firm-register Companies House. That’s a rate of 16.1pc in UK tax.
B&M’s spokesman said the Arora brothers and Leahy were all UK residents and paid full tax on any income.