Next slammed with 22.4 million pound tax bill

Next has been slapped with a 22.4 million pound tax bill after a court found the high street retailer guilty of using a tax avoidance scheme known as a rate-booster.

The court stated that Next had diverted UK profits to foreign subsidiaries which would allow the company to claim tax relief on overseas profits. These schemes help companies avoid corporation tax on foreign profits that are then paid back to the UK parent company as under laws created to prevent double taxation of company profits, companies were able to claim credit for tax paid on money made overseas.

But some companies exploit these rules by creating what the HM Revenue and Customs (HMRC) refers to as "complex circular movements of money between companies in the same group, so they can claim there has been double taxation." As a result of the scheme, companies were able to claim far more tax had been paid on their overseas profits than the original amount paid. Next case was the second rate-booster case to go to court.

In a statement to the BBC, Next claimed they had paid the tax owed to HMRC "some years ago" and the amount had been fully accounted for at the time. The retailer added that the disagreement with the HMRC as "a technical debate around complex legislation" which had now been superseded. Next also pointed out that current UK law generally allowed companies to "repatriate their profits without a tax charge".