BRITAIN’S biggest travel company paid no UK corporation tax in its last financial year despite posting record annual profits.
Thomson and First Choice operator Tui Travel hailed a “renaissance” of the package holiday as it reported an 8 per cent leap in underlying pre-tax profits to £390 million. Profits at its UK and Ireland division grew 32 per cent to £197m as customers opted for its highly profitable range of “unique” branded holidays.
But its UK corporation tax bill was zero as a result of losses incurred following a restructuring launched five years ago. It said it would start paying tax again once those losses have been carried forward and that it was paying the “right amount of corporation tax” in the countries in which it operates.
A spokesman for the firm said: “We have no profits chargeable to UK corporation tax because they are all eliminated due to capital allowances, losses brought forward from prior years as a result of restructuring and costs incurred as a result of the ash cloud in 2010.
“This offsets our UK taxable profits in full and is fully compliant with UK tax law, perfectly legitimate and normal practice.We expect to pay small amounts of UK corporation tax in 2013-14, with significantly larger amounts in later years as our brought-forward losses are eliminated.”
Details of its tax situation risk fanning the flames of the row that erupted after it was revealed that US giants Amazon, Google and Starbucks have been using legal schemes to slash their bills to the UK taxman.
In its full-year results, Tui said customers were once again opting for the certainty of all-inclusive package deals and reported strong demand for holidays next year as households look to avoid a repeat of last summer’s wash-out UK summer.
It said bookings from British customers for next summer were up 12 per cent on the year before, with its “unique” branded holidays – such as Couples, Sensatori and SplashWorld – accounting for the lion’s share.
Package deals are more profitable for the company, while it continued to benefit from difficulties at its rival Thomas Cook, which last week revealed plans to slash a further £100m in costs after suffering pre-tax losses of £485m.
Tui chief executive Peter Long said the year had been one of “many successes”.
“We have delivered record group profits, while the UK achieved outstanding results both in terms of profit and margin all against a backdrop of continued economic uncertainty,” he added.
Long said the group was aiming for ongoing earnings growth of between 7 per cent and 10 per cent a year.
James Hollins, at Investec, upgraded his price target for Tui’s shares from 170p to 270p but maintained his “hold” recommendation.
He said the firm had enjoyed “tailwinds” from weather, competitor woes and low air travel disruption in the last financial year that were sufficient to offset higher annual jet fuel costs.
These factors will not necessarily be repeated next year, while the price of jet fuel has stabilised. However, Hollins said the outlook for the firm was “fine”.
Tui recommended a final dividend of 8.3p, making a total pay-out of 11.7p per share for the year, up from 11.3p.
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